CytomX Therapeutics, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017. The interim financial statements are unaudited. CytomX is a clinical-stage oncology biotechnology company developing masked-antibody therapeutics using its Probody platform; it had no approved products or product sales.
Financial performance and position
Amounts below are in millions of dollars unless otherwise indicated.
| Metric | Q1 2017 | Q1 2016 / prior date |
|---|---|---|
| Total revenue | $11.7 | $2.2 |
| Research and development expense | $14.6 | $13.4 |
| General and administrative expense | $5.7 | $5.0 |
| Operating loss | $(8.6) | $(16.2) |
| Net loss | $(8.3) | $(16.0) |
| Basic and diluted net loss per share | $(0.23) | $(0.44) |
| Net cash used in operating activities | $(19.1) | $(5.5) |
- Revenue rose $9.4 million year over year, mainly from $6.5 million recognized upon delivery of an ImmunoGen development and commercialization license, higher BMS collaboration revenue, and recognition of AbbVie upfront payments. Revenue is collaboration-based and can vary with milestone events and performance obligations.
- Cash, cash equivalents and short-term investments totaled $162.5 million at March 31, 2017, down from $181.9 million at December 31, 2016. Current assets were $166.9 million and current liabilities $37.1 million.
- Total assets were $177.9 million; total liabilities were $104.1 million, including $92.6 million of deferred revenue. No borrowing or debt balance is listed on the balance sheet. Operating lease commitments totaled $45.6 million, including $29.5 million due in 2021 and beyond.
- Accumulated deficit was $184.6 million. Stockholders’ equity was $73.8 million. The filing does not report a product gross margin; the company remains loss-making and dependent on collaboration revenue.
Material changes and business developments
- Revenue increased substantially, while operating expenses rose more modestly. R&D expense increased $1.2 million, reflecting clinical development, headcount, facility and patent-related costs, partly offset by lower manufacturing costs. G&A expense increased $0.7 million.
- Operating cash outflow increased to $19.1 million from $5.5 million. The filing attributes working-capital changes in part to an $11.6 million decrease in deferred revenue, alongside reductions in accounts payable and accrued liabilities.
- In March, CytomX and BMS signed an amendment covering up to six additional oncology targets and two non-oncology targets. The amendment provides for a $200 million upfront payment and potential development, regulatory and sales milestones and tiered royalties. It became effective April 24, 2017, after quarter-end; the payment is therefore a subsequent event, not Q1 cash.
- ImmunoGen exercised a license option for one target in February, prompting $6.5 million of Q1 revenue recognition. AbbVie selected one discovery target in March; its second target remained unselected.
- CX-072 entered a Phase 1/2 trial, with the first patient treated in January 2017. CytomX filed an IND for CX-2009 in April and expected to start a Phase 1/2 trial around mid-2017. The company also reported BMS’s CTLA-4 program in IND-enabling studies and anticipated clinical initiation by early 2018, and expected an IND filing for AbbVie’s CX-2029 in 2018.
Outlook, risks and contingencies
- Management’s MD&A states existing resources were expected to fund operations at least through 2019. The liquidity note, however, says resources were expected to be sufficient for at least 12 months. These runway statements differ; the filing does not reconcile them. The subsequent $200 million BMS payment may affect the outlook, but was not received as of March 31.
- The company expects continued significant losses and increased R&D spending as programs advance. It says additional funding will be needed in the future; financing may be unavailable or require unfavorable terms, and spending could be reduced if anticipated results are not achieved.
- Key risks include uncertain clinical safety and efficacy, regulatory delays, competition in oncology, reliance on collaborators and third-party manufacturers and trial operators, and dependence on intellectual-property protection. CX-072 was early in human testing; CX-2009’s trial start remained subject to trial design and regulatory clearance.
- Revenue and receivables were concentrated: Customer A contributed 56% of Q1 revenue, Customer B 28%, and Customer C 12%; Customer B accounted for 80% of net receivables at quarter-end.
- The filing reports no known legal proceedings expected to have a material adverse effect. It lists no off-balance-sheet arrangements. Management concluded disclosure controls were effective at the reasonable-assurance level, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Confirm receipt and accounting treatment of the $200 million BMS upfront payment after the April 24 effectiveness date, and the precise terms for target-related milestones and royalties.
- Reconcile the filing’s differing liquidity runway statements—at least 12 months in the liquidity note versus through 2019 in MD&A—and assess the post-quarter BMS payment’s effect on cash runway.
- Track CX-072 clinical safety and efficacy data, CX-2009 trial initiation and regulatory status, and progress of collaborator programs.
- Assess the sustainability and timing of collaboration revenue, including deferred-revenue recognition, customer concentration, and the possibility that partners delay or discontinue programs.
- Monitor operating cash burn, planned R&D spending, and the $45.6 million long-term lease commitment alongside future financing needs.