CytomX Therapeutics, Inc. — 2015 Form 10-K
Reporting period: Fiscal year ended December 31, 2015. This is an annual report, not a quarterly filing. Financial amounts below are in U.S. dollars; figures are rounded to millions unless stated otherwise.
Business context
CytomX is a preclinical oncology biopharmaceutical company developing masked antibody therapies using its Probody platform. Its candidates are designed to activate in the tumor environment. The company had no products approved or in clinical trials at year-end and had generated no product-sales revenue. Revenue was primarily from collaboration research, license payments and reimbursements.
Financial highlights
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $7.712 million | $5.077 million |
| Research and development expense | $28.357 million | $28.302 million |
| General and administrative expense | $12.558 million | $6.540 million |
| Total operating expenses | $40.915 million | $34.842 million |
| Operating loss | $33.203 million | $29.765 million |
| Net loss | $35.374 million | $30.310 million |
| Net loss attributable to common stockholders | $42.079 million | $34.876 million |
| Net loss per common share, basic and diluted | $4.90 | $35.25 |
There is no meaningful product gross margin reported because CytomX had no product sales. Revenue increased 52%, mainly from the BMS collaboration; operating expenses rose 17%, and net loss increased about 17%. R&D spending was nearly flat: lower ImmunoGen-related expense was largely offset by increased lab, supply and personnel costs. G&A rose 92%, reflecting headcount growth and IPO-related professional services.
- Cash and liquidity: Cash, cash equivalents and short-term investments totaled $186.711 million at year-end, versus $64.396 million in cash and cash equivalents in 2014. Working capital was $174.015 million; total assets were $197.215 million.
- Cash flow: Operating activities used $27.415 million in 2015, compared with $31.802 million provided in 2014, when collaboration upfront payments increased deferred revenue. Investing activities used $130.562 million, largely reflecting purchases of short-term investments. Financing activities provided $153.403 million, principally from the IPO and preferred-stock issuance.
- Debt: No long-term debt remained at December 31, 2015; the prior debt facility was repaid and terminated in September 2015.
- Funding: The October 2015 IPO raised approximately $81.8 million net. The company reported that existing cash and investments were expected to fund planned operations through the end of 2018, based on its then-current operating plan.
Material developments and outlook
- Lead wholly owned candidates were CX-072, a PD-L1 Probody, and CX-2009, a CD-166 Probody drug conjugate. Management anticipated filing for CX-072 in the second half of 2016 and CX-2009 in the first half of 2017; these were plans, not assured milestones.
- In January 2016, BMS selected a third collaboration target, triggering a $10 million payment recorded as deferred revenue. In February 2016, CytomX exercised its ImmunoGen license option for CX-2009; the agreement includes up to $60 million in development and regulatory milestones, up to $100 million in sales milestones, and tiered royalties.
- CytomX entered a lease in December 2015 for a new approximately 76,000-square-foot facility with a ten-year initial term. In March 2016, it agreed to terminate its existing lease effective November 30, 2016 without a termination payment. Reported operating-lease obligations at year-end totaled $49.614 million; the filing’s subsequent-event disclosure gives revised future lease payments of $47.709 million.
- The company expects significant losses to continue and R&D expenses to increase as programs advance. It will need additional funding in the future; financing may be unavailable or dilutive. No specific revenue or earnings guidance was provided.
Risks, contingencies and unusual items
- All candidates were preclinical, untested in humans, and dependent on the unproven Probody approach. Efficacy, safety, regulatory pathway and timing remain uncertain; animal results may not predict human outcomes.
- Collaboration revenue is concentrated: BMS represented 77% and Pfizer 23% of 2015 revenue. Revenue and future cash receipts depend on partner activity, research reimbursements, milestones and potential royalties; milestone amounts and timing are uncertain.
- 2015 included $6.705 million of preferred-stock redemption accretion and cumulative dividends, increasing the loss attributable to common stockholders beyond reported net loss. The company also recorded $1.744 million of net other expense, including fair-value remeasurement of preferred-stock liabilities and warrants; those instruments were extinguished or converted in connection with the IPO.
- A 2015 ownership change under IRC Section 382 reduced certain tax attributes estimated to expire; use of remaining net operating losses and credits may be limited. Federal NOL carryforwards were approximately $14.3 million at year-end.
- Other key exposures include reliance on third-party manufacturers and clinical-service providers, patent and licensing uncertainty, competition, clinical and regulatory delays, reimbursement and pricing pressure, and the possibility of needing further capital.
- The company reported no material legal proceedings. Its independent auditor issued an unqualified opinion on the financial statements. Management concluded disclosure controls were effective at the reasonable-assurance level; the report did not include management’s internal-control assessment or auditor attestation, citing the newly public company transition period.
Important facts for investors to verify
- Whether CX-072 and CX-2009 achieved the stated IND filing plans, and the subsequent clinical safety and efficacy evidence.
- Cash burn, collaboration receipts and whether the stated runway through 2018 remained supportable as development spending changed.
- Partner progress, target selections, license options, milestone conditions and the revenue-recognition treatment of collaboration payments.
- The full cost and timing of the new facility lease, including the effect of the existing-lease termination and any future build-out costs.
- Potential dilution from equity compensation and future financing, and the effect of Section 382 limitations on tax attributes.