Cognition Therapeutics, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The company is a clinical-stage biopharmaceutical developer with no approved products and no product-sales revenue. Its lead candidate, CT1812, is an oral small molecule targeting the sigma-2 receptor complex, with development focused on Alzheimer’s disease (AD).
Financial performance and liquidity
| Metric | FY2021 | FY2020 |
|---|---|---|
| Product-sales revenue | None | None |
| Grant income, reported in other income | $17.4 million | $10.9 million |
| Research and development expense | $18.6 million | $12.9 million |
| General and administrative expense | $10.0 million | $4.5 million |
| Total operating expenses | $28.6 million | $17.4 million |
| Net loss | $11.7 million | $7.8 million |
| Net loss attributable to common stockholders | $16.2 million | $12.1 million |
| Net cash used in operating activities | $3.6 million | $3.4 million |
- Cash and cash equivalents at year-end were $54.7 million, including $46.7 million in money market funds. Current assets were $59.0 million and current liabilities $7.9 million.
- Cash increased $49.5 million during the year, largely reflecting $53.2 million in financing cash flows. The October IPO and full November over-allotment generated approximately $44.2 million net proceeds.
- At December 31, 2021, the balance sheet reported no convertible notes or PPP loan outstanding. It included $1.2 million of short-term insurance-premium financing at 3.25% interest; the filing reports no material long-term debt balance.
- Management estimated available resources, including grant income, would fund operating and capital needs into the second half of 2023. The company also states it will need substantial additional capital to advance development and may need to raise funds sooner than expected.
- Profit margins are not meaningful for this pre-revenue company. Grant income partially offsets development costs but is conditional on eligible expenditures and is subject to audit.
Material changes and operating developments
- Net loss increased to $11.7 million from $7.8 million. R&D expense rose $5.7 million, primarily from $5.7 million higher manufacturing costs; G&A expense rose $5.5 million, including $4.0 million higher equity-based compensation and increased public-company, professional and insurance costs.
- The company completed its IPO in October 2021 and received the underwriters’ over-allotment proceeds in November. Outstanding preferred stock and SAFEs converted into common stock; the company reported 22.2 million common shares outstanding at year-end.
- Operating cash use was relatively stable year over year despite the higher net loss, reflecting noncash items—including $5.2 million of equity-based compensation—and working-capital movements.
- Cumulative grant awards were approximately $168.9 million, primarily from the National Institute on Aging (NIA). The filing identifies an approximately $81.0 million NIA award for the planned 540-patient early-stage AD study.
Outlook, management commentary and risks
- CT1812 trials: Two Phase 2 studies in mild-to-moderate AD were ongoing. Management anticipated SHINE top-line data in 2023 and SEQUEL data in the fourth quarter of 2022. The planned 540-patient COG0203 early-stage AD study was expected to begin enrollment in the second half of 2022.
- Other programs: Management planned to advance CT1812 into a Phase 2 dry age-related macular degeneration study in the second half of 2022, subject to completing preclinical work and FDA discussions. The company was evaluating sites for a 120-patient Phase 2 dementia with Lewy bodies study. Timelines are forward-looking plans, not assured outcomes.
- Preliminary clinical evidence: An interim analysis of the first 24 SHINE patients reported a significant reduction in CSF amyloid-beta at the 300 mg dose (p=0.0178). The approximately three-point pooled-dose difference versus placebo on ADAS-Cog 11 was not statistically significant (p=0.1295); the trial was not powered to detect statistically significant treatment differences. Results remain preliminary.
- Safety: CT1812 was generally described as well tolerated. Mild, transient liver-enzyme elevations occurred in some studies; in earlier trials, some affected participants discontinued treatment, and levels returned to normal. Larger and longer trials could reveal additional risks.
- Funding and execution: The company has no approved products, has incurred cumulative losses since inception and expects significant future expenses. It depends on future financing and grant support, and may face dilution or unfavorable financing terms. Grant receipts depend on eligible costs, continued awards and compliance.
- Other key risks: Clinical results may not replicate or support approval; COVID-19 could disrupt enrollment, trials, suppliers or regulatory activity; the company relies on third-party manufacturers and trial contractors, including a single supplier for key CT1812 manufacturing stages; and it has no commercial sales infrastructure.
- Cyber incident: A November 2021 phishing and fraudulent-wire event caused an approximately $0.5 million loss. The company reported receiving $0.5 million net proceeds under its cyber-insurance policy and implementing control enhancements.
- The company reported no pending legal action or contingency with at least a reasonable possibility of material loss. Ernst & Young issued an unqualified opinion on the financial statements. Management concluded disclosure controls were effective; management’s internal-control assessment and auditor attestation were omitted under the transition rules for new public companies.
Important facts for investors to verify
- Whether the stated cash runway into the second half of 2023 remains achievable, given trial spending, grant reimbursements and any later financing.
- Final SHINE results and complete statistical and safety data; in particular, the distinction between the significant biomarker finding and nonsignificant interim cognitive result.
- Actual enrollment, timing and funding status for COG0203, SEQUEL, the DLB study and the proposed dry AMD trial, including any changes after FDA discussions.
- Grant-award conditions, reimbursement timing, audit exposure and whether expected future NIA funding is secured.
- CT1812 manufacturing capacity, quality and supply continuity, given reliance on third parties and concentrated suppliers.
- Whether the reported insurance recovery fully resolved the cyber loss and what control changes followed the incident.
- Potential share dilution, including equity-plan awards and future financing needs; year-end shares outstanding were 22.2 million, while 22.6 million were reported outstanding as of March 23, 2022.