COMPASS Pathways plc — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. COMPASS is a clinical-stage mental health company developing COMP360 psilocybin therapy with psychological support, principally for treatment-resistant depression (TRD). It has no approved products and has generated no revenue.
Financial performance and liquidity
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $15.9m | $11.4m | $31.3m | $18.2m |
| General and administrative expense | $11.3m | $8.2m | $21.4m | $14.9m |
| Net loss | $21.0m | $17.5m | $42.2m | $30.2m |
| Net loss per share | $0.50 | $0.44 | $1.00 | $0.79 |
| Operating cash used | Not presented quarterly | Not presented quarterly | $41.1m | $31.5m |
At June 30, cash and cash equivalents were $207.2m, down from $273.2m at December 31, 2021. Total assets were $238.6m and total liabilities were $14.1m, including $3.0m of operating lease liabilities. The filing reports no borrowings or other debt. Current assets were $232.0m versus current liabilities of $13.2m. Accumulated deficit was $211.8m.
Six-month investing cash outflow was $0.5m; financing provided $0.4m, mainly from option exercises. Cash, cash equivalents and restricted cash declined $66.1m overall, including a $24.8m adverse foreign-exchange effect. The company recorded a $3.3m foreign-exchange gain in other income, illustrating that transaction gains and cash translation effects moved differently.
Operating expenses increased year over year as clinical development, manufacturing, personnel, share-based compensation, consulting and public-company costs rose. UK R&D tax-credit benefits were $7.0m for the first half, compared with $4.1m; these benefits partly offset operating losses. No meaningful operating margin comparison is available because the company had no revenue.
Outlook, developments and risks
- Management expects existing cash to fund operating expenses and capital requirements into 2024, but says this estimate depends on assumptions that may prove incorrect. The company expects substantial losses and rising R&D and administrative costs and may need additional financing.
- Management anticipated initiating a Phase III TRD program in Q4 2022. A Phase II PTSD study was underway; after quarter-end, on July 28, the company announced a Phase II anorexia nervosa study planned to enroll 60 patients.
- The company reported positive topline Phase IIb TRD results announced in November 2021: the 25 mg arm met the primary endpoint versus the 1 mg arm at three weeks. These were previously announced topline results, not new Q2 financial-period results.
- Key risks include clinical-trial delays or unsuccessful results, adverse effects, regulatory approval and controlled-substance scheduling, manufacturing and supplier dependence, therapist and treatment-site capacity, reimbursement and market acceptance, intellectual-property disputes, foreign-exchange volatility, and access to capital. COVID-19 had previously delayed trial enrollment and could again disrupt trials or supply chains.
- After quarter-end, Kabir Nath became CEO effective August 1, 2022; the company disclosed inducement awards of options for 600,000 shares and 50,000 restricted share units. Co-founder George Goldsmith became Executive Chairman through December 31, 2022, then is to remain Board chair.
- A third party’s requests for post-grant review of two U.S. patents were denied in June 2022; the challenger requested rehearing in July. The company says it cannot assure the outcome of future challenges.
Most important facts for investors to verify
- Whether the planned Phase III TRD program began on schedule, and subsequent trial design, enrollment and results.
- Cash burn, foreign-exchange exposure and whether the stated runway into 2024 remains realistic as development spending increases.
- Eligibility for and timing of UK R&D tax-credit cash receipts, including potential changes to SME-program limits.
- Regulatory requirements for COMP360, including U.S. scheduling, and the readiness and compliance of third-party manufacturers and therapy sites.
- Progress of the patent rehearing and any material changes in CEO-transition costs, share dilution or financing needs.