Cogent Biosciences, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. The company was renamed from Unum Therapeutics to Cogent Biosciences effective October 6, 2020; its shares trade as COGT. Cogent is a clinical-stage biotechnology company with no approved products or product-sales revenue, focused on PLX9486 for genetically defined diseases.
Financial performance and liquidity
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $0.3 million | $1.0 million | $7.9 million | $7.2 million |
| Research and development expense | $5.0 million | $10.3 million | $19.6 million | $33.4 million |
| General and administrative expense | $5.6 million | $2.7 million | $12.1 million | $8.3 million |
| Net loss | $50.0 million | $11.9 million | $63.5 million | $34.1 million |
| Net loss per share, basic and diluted | $5.07 | $1.56 | $7.56 | $4.49 |
| Operating cash use | Not stated for quarter | Not stated for quarter | $26.5 million | $33.1 million |
At September 30, cash and cash equivalents were $129.4 million, versus $37.4 million at December 31, 2019. Total assets were $139.9 million and total liabilities $23.8 million. The company reported no debt; liabilities included $5.7 million of operating lease obligations and an $12.0 million contingent value right (CVR) liability. Current assets were $133.4 million against current liabilities of $20.1 million. No product gross margin is applicable because Cogent had no product sales.
Nine-month cash flows included $8.4 million provided by investing activities, mainly $8.1 million from the BOXR asset sale, and $110.1 million provided by financing activities, primarily $98.9 million net proceeds from preferred stock and $10.7 million from common-stock sales to Lincoln Park Capital (LPC). Cash, cash equivalents and restricted cash rose by $92.0 million to $130.7 million.
Material changes and unusual items
- Net loss increased year over year, principally reflecting a $46.9 million acquired in-process research and development charge for the Kiq asset acquisition. The acquired PLX9486 and PLX0206 license had no alternative future use for accounting purposes.
- Operating expenses also reflected $2.9 million of accelerated stock-based compensation tied to the Kiq acquisition. A $0.8 million reduction in accrued legacy-trial costs reduced R&D expense.
- Other income included a $7.5 million gain on disposal of long-lived assets, primarily the BOXR platform sale, partly offset by a $0.5 million unfavorable change in CVR fair value. The BOXR transaction provided $8.1 million upfront, with up to $3.4 million in additional patent-related milestones not recognized at quarter-end.
- Cogent reduced its workforce by approximately 60% (43 employees) in early 2020, prioritizing resources toward its preclinical program. The company subsequently shifted focus to PLX9486 and wound down its legacy cell-therapy programs.
- On July 9, Cogent raised $104.4 million gross, or $98.9 million net, through a PIPE of Series A non-voting convertible preferred stock. The preferred shares were classified outside stockholders’ equity because holders could seek cash redemption if conversion approval were not obtained. The potential $104.4 million beneficial conversion feature was contingent on shareholder approval and had not been recognized at September 30.
- Subsequent to quarter-end, shareholders approved preferred-stock conversion and a 1-for-4 reverse stock split on November 6, 2020. The filing also reports $7.2 million net proceeds from additional LPC share sales after quarter-end.
Outlook, commentary and risks
- Management stated that September 30 cash was expected to fund operating expenses and capital requirements into 2023. The financial-statement note more cautiously states cash is sufficient for at least 12 months from issuance; management’s runway estimate depends on assumptions that may prove incorrect. Additional financing may be needed beyond that period.
- Cogent plans an FDA interaction on PLX9486 combination treatment in GIST and expected to initiate another GIST study in the second half of 2021. Subject to regulatory feedback, it expected to begin trials in advanced systemic mastocytosis in the first half of 2021 and indolent systemic mastocytosis in the second half of 2021. No financial guidance was provided.
- Management cited clinical observations in 18 heavily pretreated GIST patients receiving PLX9486 with sunitinib: median progression-free survival of 11 months and an overall response rate of 16.6% (two partial responses and one complete response). These data are preliminary and from a small patient group; they do not establish efficacy or predict later trial outcomes.
- Seattle Genetics collaboration termination was effective January 16, 2020. All collaboration performance obligations were complete by September 30, and no deferred revenue remained.
- Key risks include clinical and regulatory uncertainty, small early-trial populations, competition, sole-source PLX9486 suppliers, reliance on contract manufacturers and CROs, potential COVID-19-related trial or supply disruptions, and the need for future capital. The company said no material COVID-19 impact had occurred through September 30, but future effects were uncertain.
- July 2020 financing and acquisition may have triggered an ownership change limiting use of tax-loss and credit carryforwards under Section 382; the company was still assessing the impact. The company also reported termination of its NUS/St. Jude license effective January 12, 2021. After quarter-end, CEO Charles Wilson resigned and Andrew Robbins was appointed CEO; a 1,860,605-share option inducement award was granted to Robbins.
Investor verification priorities
- Verify PLX9486 trial plans, FDA feedback, and the full, final clinical data behind the reported 18-patient GIST results.
- Reconcile the stated cash runway into 2023 with the financial-statement note’s “at least 12 months” language and monitor operating cash burn.
- Assess dilution and shareholder rights from the preferred-stock conversion, its contingent beneficial conversion feature, LPC sales, and subsequent equity awards.
- Track the CVR liability, timing and form of payments to legacy holders, BOXR escrow release, and whether the $3.4 million potential milestones are achieved.
- Confirm the outcome of the Section 382 tax-attribute study and evaluate supply continuity given PLX9486’s single-source suppliers.