Cocrystal Pharma, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This annual filing compares results with FY2020. Cocrystal is a clinical-stage biotechnology company developing antiviral drug candidates; it has no approved products and has never generated product-sale revenue.
Financial results and position
| Metric | FY2021 / Dec. 31, 2021 | FY2020 / Dec. 31, 2020 |
|---|---|---|
| Revenue | $0 | $2.014 million |
| Research and development expense | $8.794 million | $6.034 million |
| General and administrative expense | $5.427 million | $5.566 million |
| Operating loss | $14.221 million | $9.586 million |
| Net loss | $14.185 million | $9.648 million |
| Basic and diluted loss per share | $0.16 | $0.17 |
| Cash used in operating activities | $12.719 million | $9.830 million |
| Cash and restricted cash | $58.755 million | $33.060 million |
| Total assets / total liabilities | $79.392 million / $1.843 million | $54.242 million / $1.737 million |
FY2021 financing activities provided $38.466 million net cash, primarily from common-stock issuances. The company issued 27.03 million shares during the year; common shares outstanding increased from 70.439 million to 97.469 million. Cash on hand was approximately $55 million at March 23, 2022. Management estimated resources would fund operations through 2023, subject to risks and uncertainties.
The balance sheet reports $500,000 in operating lease liabilities and $34,000 in finance lease liabilities; no material conventional borrowing balance is disclosed in the provided filing text. Profit margins are not meaningful because the company had no FY2021 revenue. Goodwill was $19.092 million, with no impairment recorded for FY2021.
Material changes and business developments
- Revenue fell to zero from $2.014 million, reflecting completion of Cocrystal’s Merck-funded research work and no further 2021 collaboration revenue.
- Net loss increased by $4.537 million. Management attributed the increase primarily to COVID-19 discovery work and influenza-A manufacturing and clinical-trial preparation costs.
- R&D expense rose $2.760 million as COVID-19 and influenza programs advanced. G&A expense declined $139,000, primarily due to lower professional fees after certain legal matters concluded.
- Operating cash use increased by $2.889 million, reflecting lost Merck revenue and higher program costs. Equity financing increased cash, while also materially diluting existing shareholders.
Pipeline, outlook, risks and contingencies
- Influenza: CC-42344, a PB2 inhibitor for influenza A, received Australian regulatory clearance for Phase 1 testing; enrollment began in March 2022. Management reported preclinical activity against influenza A strains, including resistant strains. Merck is responsible for further development of the partnered influenza A/B compounds; Cocrystal may receive up to $156 million in development, regulatory and sales milestones, plus royalties, but no milestones had been achieved as of the filing.
- Coronavirus: CDI-45205 was being advanced toward IND status, with a Phase 1 study targeted for 2022; the FDA provided pre-IND guidance in January 2022. In January 2022, the company selected CDI-988 and CDI-873 for further development as potential oral SARS-CoV-2 treatments and planned to initiate a first-in-human trial with one candidate in 2022. These were forward-looking plans, not completed clinical results.
- HCV and norovirus: CC-31244 completed Phase 1 and Phase 2a work; Phase 2b enrollment was completed and a final study report filed with the FDA. Cocrystal was seeking a development partner. The filing describes norovirus inhibitor development, but does not clearly establish completion of the previously anticipated animal proof-of-concept study.
- Funding and dilution: The company expects continuing losses and negative operating cash flow for several years and may need additional capital or partnerships. Future financing may be unavailable on acceptable terms and could further dilute shareholders. Potential KSURF milestone payments total approximately $7.3 million across two licenses, contingent on development and commercialization milestones.
- Development and operating risks: All candidates remain preclinical or early clinical. Clinical outcomes, regulatory approval, market demand and commercialization are uncertain. COVID-19-related CRO/CMO disruption, staffing and supply shortages have caused delays and cost increases; competition, viral variants, reliance on collaborators and third-party manufacturers, and intellectual-property risks are material concerns.
- Listing and legal matters: Nasdaq had notified the company of a minimum-bid-price deficiency; the company planned to seek shareholder approval for a reverse split, with delisting risk if compliance was not restored. The insurer Liberty Insurance Underwriters disputed coverage and sought recovery of approximately $1 million previously paid; trial was scheduled for July 2022. A separate former-lawyer case had been dismissed and affirmed on appeal, with a rehearing petition pending. The company said potential losses could not be reasonably estimated and recorded no loss contingency. An AGP lawsuit was settled in August 2021.
- Audit and controls: The auditor issued an unqualified opinion on the financial statements and identified goodwill impairment assessment as a critical audit matter. Management concluded disclosure controls and internal control over financial reporting were effective at year-end; the auditor did not express an opinion on internal control effectiveness.
Most important facts for investors to verify
- Actual cash, quarterly cash burn and updated runway relative to management’s estimate of funding through 2023.
- CC-42344 Phase 1 progress and results, and whether CDI-45205 or either selected COVID-19 candidate entered clinical testing as planned.
- Merck’s development progress and any achievement of contractual milestones or royalty-generating sales.
- Any further equity issuance, resulting dilution, and the status of Nasdaq bid-price compliance and any reverse-split action.
- Current status and financial exposure of the insurance dispute and remaining litigation, plus progress on KSURF obligations and norovirus studies.