CytomX Therapeutics, Inc. — FY 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter filing; quarterly figures below are unaudited. CytomX is a clinical-stage oncology biotechnology company developing Probody therapeutics. It had no approved products or product-sales revenue.
Financial performance and position
| Metric | FY 2018 | FY 2017 |
|---|---|---|
| Revenue | $59.5 million | $71.6 million |
| Research and development | $103.9 million | $92.3 million |
| General and administrative | $33.5 million | $25.6 million |
| Operating loss | $77.9 million | $46.3 million |
| Net loss | $84.6 million | $43.1 million |
| Net loss per share | $2.03 | $1.16 |
| Cash, cash equivalents and short-term investments at year-end | $436.1 million | $374.1 million |
| Working capital at year-end | $347.6 million | $327.5 million |
| Long-term debt | None reported | None reported |
2018 operating cash use was $75.5 million; investing activities provided $5.9 million, primarily from net maturities of short-term investments; financing activities provided $139.6 million, mainly from a July stock offering. The company reported no cost of product sales, so conventional product gross margins are not meaningful. Management said existing capital was expected to fund planned operations into 2021, while noting the estimate depends on clinical progress and spending.
Fourth-quarter 2018 revenue was $11.5 million and net loss was $32.2 million, compared with revenue of $27.1 million and net income of $0.6 million in fourth-quarter 2017. The 2018 quarter included an $8.9 million income-tax provision; for the full year, the $14.3 million provision reflected, among other factors, differences in tax and GAAP timing for collaboration revenue and limits on use of tax attributes.
Changes versus prior year and notable items
- Annual revenue declined 16.9%, while R&D expense rose 12.6% and G&A expense rose 30.9%. The operating loss widened to $77.9 million.
- Collaboration revenue remained the company’s only material revenue source. BMS contributed $32.8 million and AbbVie $19.0 million in 2018, together accounting for most revenue.
- Revenue comparisons are affected by adoption of ASC 606 in 2018. Under the prior ASC 605 method, 2018 revenue would have been $66.0 million; the filing reports a $10.9 million transition adjustment to accumulated deficit at adoption.
- Cash and investments increased by $62.0 million from year-end 2017, supported in part by the July 2018 offering, which generated $134.6 million net proceeds and issued 5.87 million shares.
Business outlook, developments and risks
- Pipeline: CX-072 (PD-L1) and CX-2009 (CD166) were wholly owned Phase 1/2 programs; CX-2029 (CD71) was in Phase 1/2 with AbbVie. BMS was advancing the CTLA-4 Probody BMS-986249 in Phase 1/2. Amgen’s EGFR-CD3 program remained in preclinical lead optimization.
- Clinical evidence remains preliminary: In February 2019 data disclosed after year-end, CX-072 monotherapy showed 4 responses among 24 efficacy-evaluable patients at doses of at least 3 mg/kg; in a combination cohort, 4 of 19 evaluable patients had confirmed responses. For CX-2009, 5 unconfirmed partial responses were reported among 46 efficacy-evaluable patients. These early-stage results do not establish safety or efficacy in larger trials.
- Safety: CX-2009 had Grade 3/4 treatment-related adverse events in 23 of 76 treated patients, with ocular toxicity identified as a notable event; dose optimization was underway. Management reported CX-072 was generally well tolerated to date, but clinical safety and efficacy remain uncertain.
- Collaboration changes: Pfizer terminated its collaboration in March 2018. In late 2018, Amgen stopped work on two EGFR molecules after unacceptable test results and CytomX planned to evaluate alternatives. In January 2019, BMS notified CytomX it was terminating three targets; CytomX said it was assessing the financial impact and would lose future payments associated with those targets. BMS-986249 and the separate 2017 BMS amendment were not affected.
- Portfolio and operations: CytomX indefinitely postponed clinical trials for CX-188 after IND clearance, citing prioritization. ImmunoGen closed the facility supporting CX-2009 manufacturing at year-end 2018; a manufacturing transfer was in progress and not complete. Scale-up, supply continuity and regulatory bridging requirements could delay development.
- Key risks: The company expects continuing losses and may need additional financing; all candidates are investigational, and early results may not predict later trials. Other material risks include dependence on partners and sole-source contract manufacturers, trial enrollment and regulatory uncertainty, competition, intellectual-property challenges, and the possibility of unexpected toxicity. The company reported no material litigation and no off-balance-sheet arrangements.
- Accounting and controls: The financial statements received an unqualified audit opinion. Management and the auditor concluded internal control over financial reporting was effective as of December 31, 2018. The company expected to recognize an operating-lease right-of-use asset and liability of approximately $27–$32 million upon adopting the new lease standard in 2019.
Investor facts to verify
- Whether the stated cash runway into 2021 remains supportable under current clinical spending, trial timing and financing assumptions.
- The final financial and revenue-recognition effects of BMS’s termination of three targets, including accelerated recognition of related deferred revenue and foregone future payments.
- Updated, sufficiently mature CX-072, CX-2009 and CX-2029 trial data, including response durability, adverse events and dose selection.
- Progress and reliability of CX-2009 manufacturing transfer, and the ability to scale and stabilize supplies for later-stage trials.
- How much collaboration revenue depends on a small number of partners and how future milestones, service periods and ASC 606 estimates may affect reported results.