CytomX Therapeutics, Inc. — Q3 2015 Form 10-Q
Business context and reporting period. This unaudited report covers the three and nine months ended September 30, 2015. CytomX is a preclinical oncology biopharmaceutical company developing Probody antibody therapeutics; it had no product candidates in clinical trials or products approved for sale and generated no product-sale revenue. Its reported revenue came primarily from collaborations and research services.
Financial performance and liquidity
| Metric | Three months ended Sept. 30, 2015 | Three months ended Sept. 30, 2014 | Nine months ended Sept. 30, 2015 | Nine months ended Sept. 30, 2014 |
|---|---|---|---|---|
| Revenue | $1.9m | $1.9m | $5.7m | $3.2m |
| Research and development | $9.2m | $3.9m | $18.9m | $24.0m |
| General and administrative | $4.1m | $1.5m | $8.5m | $4.4m |
| Operating loss | $11.3m | $3.5m | $21.7m | $25.1m |
| Net loss | $11.9m | $3.6m | $23.9m | $25.5m |
| Net loss attributable to common stockholders | $14.8m | $4.8m | $30.0m | $28.9m |
| Basic and diluted loss per common share | $14.26 | $4.86 | $29.66 | $30.04 |
Amounts are in U.S. dollars; losses and expenses are shown as positive magnitudes in the table. The filing does not report gross profit or operating margins. Common-stockholder loss includes preferred-stock accretion and dividends; the reported weighted-average common-share counts were approximately 1.04m for Q3 2015 and 1.01m for the first nine months, before the October IPO conversion.
- Balance sheet at September 30: cash and cash equivalents of $36.2m and short-term investments of $77.5m, totaling $113.7m; total assets $124.8m; accumulated deficit $106.0m. Current assets were $115.1m versus current liabilities of $14.0m.
- Debt: the company repaid and terminated its debt facility in September 2015. No long-term debt remained at quarter-end, compared with $3.0m total current and long-term debt at December 31, 2014.
- Cash flows, nine months: $19.2m used in operations, $79.7m used in investing (largely purchases of short-term investments), and $70.8m provided by financing. Cash and cash equivalents decreased $28.2m to $36.2m; investment purchases and maturities shifted funds into short-term investments.
- Margins and profitability: CytomX remained loss-making, with operating expenses substantially exceeding collaboration revenue. Management expected significant losses to continue.
Material changes versus prior comparable periods
- Q3 revenue was essentially flat year over year. Nine-month revenue rose $2.5m, primarily from the BMS collaboration signed in 2014.
- Q3 R&D expense increased $5.2m, mainly from $4.1m higher lab services and supplies and $1.0m higher personnel costs. Nine-month R&D expense fell $5.1m because the 2014 period included a $12.8m ImmunoGen-related expense, partly offset by increased pipeline, personnel, facility and equipment costs.
- G&A expense rose $2.6m in Q3 and $4.2m for the nine-month period, reflecting increased personnel and professional-services costs, including IPO-related work.
- Nine-month cash from operations swung from $36.2m provided in 2014 to $19.2m used in 2015. The prior-year period benefited from large upfront collaboration payments and associated deferred revenue; 2015 operating cash use included recognition of previously deferred revenue.
Outlook, significant events and risks
- On October 14, 2015, after quarter-end, CytomX completed its IPO of 7,666,667 shares at $12.00 per share and received approximately $82.4m net proceeds. Preferred shares converted into common stock; preferred-stock warrants were net exercised. The October financing materially strengthened liquidity after the reporting date.
- Management said available funds, including IPO proceeds, would cover planned expenditures and obligations for at least the next 12 months. A risk-factor disclosure separately estimated runway through the end of 2018 under the current operating plan. These are different stated horizons and merit clarification.
- The filing planned a Phase 1 trial of CX-072 in 2016 and a Phase 1 trial of a CD-166 Probody drug conjugate in 2017, subject to preclinical progress, trial design and regulatory filings. The company anticipated higher R&D spending as candidates advance.
- Revenue is dependent on collaboration performance, research reimbursements and uncertain milestones. BMS and Pfizer accounted for substantially all reported revenue; future milestones and royalties depend on partner decisions and development outcomes. The filing cites potential BMS payments up to $1.217bn and Pfizer payments up to $626.5m, contingent on targets, milestones and sales—not assured revenue.
- Key risks include the unproven Probody platform and preclinical-stage pipeline; clinical, regulatory, manufacturing and scale-up uncertainty; reliance on third-party manufacturers and collaborators; need for future financing; competition; and intellectual-property risks. CytomX stated it would need additional funds in the future, and future financing might be unavailable or dilutive.
- Other items: revenue concentration between two collaboration customers; $3.0m of deferred IPO costs included in other assets at quarter-end; preferred-stock fair-value remeasurement contributed to nine-month other expense; and the company reported no material litigation. Management assessed disclosure controls as effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the stated liquidity runway of “at least” 12 months with the risk-factor estimate through year-end 2018, and review the assumptions behind each.
- Track post-IPO cash, investment balances, quarterly operating cash burn and expected spending as clinical development begins.
- Monitor whether planned CX-072 and CD-166 trial timelines are met, and review emerging safety, efficacy and regulatory data.
- Assess reliance on BMS and Pfizer, collaborator target and development decisions, and whether contingent milestones are achieved; do not treat maximum collaboration payments as committed funding.
- Review the post-IPO share count and dilution, including the conversion of preferred stock, warrant exercise and equity awards. The filing reported 36,024,292 common shares outstanding as of November 19, 2015.