Connect Biopharma Holdings Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing; the text does not provide a clear set of Q4-only financial results. Financial statements are prepared under IFRS and presented primarily in RMB.
Business context and key financial metrics
Connect Biopharma is a clinical-stage biopharmaceutical company developing therapies for T cell-driven inflammatory diseases. It had no approved products and generated no revenue in 2021.
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | RMB 518.0 million | RMB 150.9 million |
| Administrative expense | RMB 122.4 million | RMB 47.7 million |
| Operating loss | RMB 631.4 million | RMB 197.8 million |
| Net loss | RMB 1,306.8 million (US$205.0 million) | RMB 779.2 million |
| Net cash used in operating activities | RMB 544.9 million (US$85.5 million) | RMB 167.2 million |
| Cash and cash equivalents at year-end | RMB 1,706.9 million (US$267.7 million) | RMB 1,010.1 million |
The company reported no debt outstanding. Year-end total assets were RMB 1,855.7 million and total liabilities were RMB 119.8 million. Profit margins are not meaningful because the company had no revenue.
Material changes versus FY2020
- Net loss increased by RMB 527.6 million. The larger loss reflected higher R&D spending and a higher fair-value loss on preferred instruments.
- R&D expense rose by RMB 367.1 million, mainly as CBP-201 and CBP-307 advanced in clinical development. Clinical-trial expenses for CBP-201 increased to RMB 349.5 million from RMB 58.5 million; CBP-307 expenses increased to RMB 112.3 million from RMB 46.5 million.
- Operating cash use increased by RMB 377.8 million, while cash and cash equivalents increased, supported by the March 2021 IPO.
- The company completed its IPO in March 2021, selling 12,937,500 ADSs at US$17 each and receiving net proceeds of US$202.8 million after underwriting discounts, commissions and offering expenses. Preferred shares converted to ordinary shares upon the IPO.
Outlook, management commentary and notable risks
- Management stated that available cash was expected to fund anticipated operating needs for at least 12 months from the financial-statement issuance date. It also said additional financing, licensing or partnership proceeds would be needed to fund late-stage trials and that existing capital would not cover all late-stage programs.
- CBP-201: The global Phase 2b atopic dermatitis trial met its primary and key secondary endpoints and was generally well tolerated. The company planned a global Phase 3 program in adults and adolescents in the second half of 2022, subject to regulatory discussions. Its China pivotal trial was expanded from 255 to approximately 500 participants; enrollment was expected to continue into the second half of 2022, with topline data potentially in the first half of 2023. Management’s efficacy discussion includes post-hoc analyses and notes that trial population characteristics and discontinuations may have affected results.
- CBP-307: A global Phase 2 ulcerative colitis trial was fully enrolled, with topline results expected before the end of Q2 2022. The China Crohn’s disease Phase 2 trial ended early because of COVID-related recruitment challenges; results from the limited number of participants were exploratory and not statistically powered. Further Crohn’s development was to be reconsidered after the UC results.
- CBP-174: A Phase 1 study was underway, with topline results expected in the first half of 2022.
- Clinical development is exposed to enrollment and execution delays, COVID-19 disruption, safety and efficacy uncertainty, regulatory approval risk, reliance on CROs and contract manufacturers, and potential disruption to trial sites in Ukraine following Russia’s invasion.
- PRC-related risks include evolving regulatory, data-security and human-genetic-resource requirements; restrictions on moving cash across borders; and uncertainty around overseas listings. The auditor was not then subject to PCAOB inspection, creating potential U.S. trading and delisting risk.
- Two material weaknesses in financial reporting controls were identified: insufficient qualified IFRS/SEC reporting personnel and inadequate formal period-end closing controls, particularly for expense cutoff and accruals. Management was working on remediation; effectiveness was not assured.
- A May 2021 phishing incident caused a reported RMB 7.0 million loss; RMB 1.0 million was recovered from insurance. The Taicang construction project was on hold pending permits, with RMB 146.9 million of capital commitments reported at year-end.
Most important facts for investors to verify
- Current cash runway, expected clinical-trial spending and the timing and terms of any additional financing.
- Final CBP-201 Phase 2b data, including the relevance of post-hoc analyses, and subsequent Phase 3 design, enrollment and regulatory plans.
- CBP-307 UC trial results and whether management resumes Crohn’s disease development.
- Progress in remediating the two financial-reporting material weaknesses and the status of PCAOB access to the auditor.
- Construction-permit status, the use and availability of IPO proceeds, and the amount and timing of remaining capital commitments.