CytomX Therapeutics, Inc. — Q3 2019 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2019. CytomX is a clinical-stage oncology biopharmaceutical company developing antibody therapeutics using its Probody platform. It had no products approved for sale and generated no product-sales revenue; reported revenue came primarily from collaborations and licenses. Financial amounts below are in U.S. dollars.
Financial performance and liquidity
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | $10.7 million | $12.5 million | $49.2 million | $48.0 million |
| Research and development expense | $28.0 million | $27.5 million | $95.2 million | $75.6 million |
| General and administrative expense | $8.5 million | $8.1 million | $27.5 million | $24.5 million |
| Operating loss | $25.7 million | $23.2 million | $73.5 million | $52.1 million |
| Net loss | $23.7 million | $23.4 million | $66.8 million | $52.4 million |
| Basic and diluted net loss per share | $0.52 | $0.53 | $1.47 | $1.29 |
- Cash and investments: At September 30, 2019, cash and cash equivalents were $164.6 million and short-term investments were $161.1 million, totaling $325.7 million. This compares with $436.1 million at December 31, 2018. Current assets were $334.8 million and current liabilities were $76.1 million.
- Cash flow: For the nine months, operating activities used $111.0 million, investing activities provided $26.8 million, and financing activities provided $1.2 million. Cash, cash equivalents and restricted cash declined by $82.9 million to $165.6 million.
- Debt and obligations: The filing reports no borrowings or debt balance. Operating lease liabilities totaled $28.3 million, including $2.7 million current and $25.6 million long-term. Deferred revenue was $238.8 million, largely reflecting collaboration payments to be recognized as obligations are performed.
- Equity: Stockholders’ equity was $82.1 million, down from $130.9 million at year-end 2018; accumulated deficit was $381.8 million.
Material changes versus the prior comparable period
- Q3 revenue declined $1.8 million year over year, mainly from lower AbbVie revenue and reduced BMS amortization. Nine-month revenue rose $1.2 million, despite lower AbbVie and Amgen revenue and the absence of prior-year ImmunoGen and Pfizer revenue.
- Nine-month net loss increased $14.4 million. R&D expense increased $19.6 million, including a $5.0 million technology know-how acquisition, $3.4 million of UCSB amendment-related costs, higher personnel and clinical costs, and increased facilities allocations.
- Operating cash use increased $64.2 million year over year. The filing attributes 2019 cash use in part to lower deferred revenue and payments of 2018 taxes, sublicense fees and other liabilities. The prior-year period included $134.6 million of net proceeds from a stock offering; there was no comparable offering in 2019.
- BMS ended preclinical work on three targets in Q1 2019. CytomX accelerated $17.4 million of associated deferred revenue into revenue because it had no further obligations for two of those targets. Work under the 2017 BMS amendment continued.
Outlook, management commentary and risks
- Management said existing capital resources were expected to fund operations into 2021, but also stated the company would need to raise additional funds in the future. It warned that financing may not be available on acceptable terms and that spending plans might need to be reduced if results or financing do not meet expectations.
- Management expected R&D spending to increase as clinical programs advance. On October 29, 2019, after quarter-end, CytomX announced initiation of a Phase 2 trial of CX-072 with ipilimumab in relapsed or refractory melanoma.
- At the filing date, CX-072, CX-2009 and partnered CX-2029 were in Phase 1/2 trials; BMS was advancing CTLA-4 candidate BMS-986249 in Phase 1/2. The Amgen EGFR-CD3 program was in lead optimization. CytomX said further development of CX-188 had been indefinitely postponed.
- Key risks include clinical failure or delays, adverse effects and immunogenicity, patient enrollment, reliance on collaborators and third-party manufacturers, and the need for additional capital. The filing highlights CX-2009 ocular toxicity and reported anti-drug antibodies in the CX-072 trial; early clinical findings do not establish future safety or efficacy.
- Revenue depends substantially on collaboration performance and timing of milestones. BMS accounted for $40.3 million of nine-month revenue, while milestone revenue is generally constrained until achievement is sufficiently probable. The company also relies on third parties for product supply and has no near-term plan to establish manufacturing capabilities.
- UCSB Amendment No. 3 added annual maintenance fees of $0.75 million through 2031; early termination can accelerate some remaining fees. Management reported no known legal proceedings expected to have a material adverse effect. Disclosure controls were assessed as effective, with no material quarterly change in internal control over financial reporting.
Most important facts for investors to verify
- Whether the $325.7 million of cash and short-term investments supports the stated runway into 2021 as clinical spending rises, and what additional financing may be required.
- Clinical progress, enrollment, efficacy and safety for CX-072, CX-2009 and CX-2029, including CX-2009 ocular toxicity and CX-072 immunogenicity; also verify progress of the new CX-072/ipilimumab Phase 2 trial.
- Partner decisions and program status, especially BMS target terminations, continued BMS development, and timing of collaboration milestones and potential payments.
- Drivers of operating cash use and deferred-revenue recognition, including the one-time $17.4 million BMS acceleration and the timing of remaining $238.8 million deferred revenue.
- Manufacturing continuity and scalability, particularly third-party supply arrangements for clinical candidates and the completed CX-2009 manufacturing transfer.