Compugen Ltd. — FY 2019 Form 20-F
Reporting period: Year ended December 31, 2019. This is an annual report, not a standalone fourth-quarter filing. Financial statements are audited and prepared under U.S. GAAP; the auditor issued an unqualified opinion.
Business context
Compugen is an Israel-based, clinical-stage immuno-oncology company using computational discovery platforms to identify drug targets and develop antibody therapies. Its principal clinical programs are COM701 (PVRIG), BAY 1905254 (ILDR2, partnered with Bayer) and COM902 (TIGIT). It has no approved products and depends on collaborations, licensing and financing to support development.
Key financial metrics
| Metric (US$ millions unless stated) | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | 0.0 | 17.8 |
| Operating expenses | 28.9 | 40.0 |
| Operating loss | (28.9) | (23.2) |
| Net loss | (27.3) | (22.6) |
| Basic and diluted loss per share | $(0.43) | $(0.41) |
| Net cash used in operating activities | (27.9) | (13.3) |
| Cash, cash equivalents, restricted cash and short-term deposits at year-end | 43.9 | 45.7 |
| Total assets | 53.8 | 53.2 |
| Shareholders’ equity | 38.3 | 37.2 |
Revenue-based margins are not meaningful in 2019 because no revenue was recognized. Cash and cash equivalents plus short-term bank deposits were approximately $43.2 million, excluding restricted cash. No conventional borrowings are identified; reported liabilities include lease liabilities and deferred R&D participation. Operating lease liabilities totaled $3.6 million at year-end.
Changes versus the prior comparable period
- Revenue fell from $17.8 million to zero. The 2018 amount comprised AstraZeneca’s $10 million upfront license payment and a $7.8 million Bayer milestone.
- Operating expenses declined 28% to $28.9 million. R&D expense fell 35% to $19.8 million, mainly reflecting lower COM902 preclinical activity and restructuring savings, partly offset by COM701 clinical-trial spending. General and administrative expense rose 5% to $8.4 million.
- Net loss widened 21% to $27.3 million, as the absence of 2018 collaboration revenue outweighed the lower operating expense base.
- Operating cash use increased to $27.9 million from $13.3 million, reflecting the 2018 collaboration and milestone receipts and 2019 clinical spending. Financing provided $25.9 million, principally from the ATM offering and option exercises.
- Shares outstanding increased to 67.9 million from 59.8 million at year-end 2018. The Company raised approximately $23.5 million gross through its ATM facility in 2019; the facility was terminated by year-end.
Outlook, commentary and risks
- Management expected existing cash and short-term deposits to fund operations through mid-2021, excluding potential additional collaboration proceeds or financing. It projected 2020 R&D expense to increase approximately 13% from 2019 and represent about 70% of operating expenses.
- The February 2019 restructuring reduced the workforce by 35%, consolidated R&D in Israel and shifted some preclinical work to external providers. Headcount fell to 61 from 89.
- COM701 was in Phase 1 dose escalation. Preliminary data reported in November 2019 showed tolerability through 10 mg/kg without dose-limiting toxicities and stable disease/disease control in 9 of 13 patients; these early results do not establish efficacy. COM902’s Phase 1 trial was expected to begin in early 2020; BAY 1905254 was in a Bayer-sponsored Phase 1 study.
- After year-end, the Bristol-Myers Squibb agreement was amended to add a Compugen-sponsored trial of COM701 with Opdivo and BMS-986207 (anti-TIGIT), with study drugs supplied at no cost. Compugen planned to complete dual-combination dose escalation but not the dual-combination expansion cohorts.
- Principal risks include ongoing losses and financing needs, uncertain clinical outcomes and enrollment, reliance on partners and sole-source contract manufacturers, competition in immuno-oncology, and the effects of restructuring on internal capabilities. The filing also identified possible operational disruption from the then-emerging coronavirus outbreak and exposure to NIS/U.S. dollar movements.
- The Company believed it was a passive foreign investment company (PFIC) for U.S. tax purposes in 2019 and said future status was uncertain. It paid no dividends and did not expect to do so in the foreseeable future.
Important facts for investors to verify
- Whether the stated mid-2021 cash runway remains valid after actual spending, clinical plans and subsequent developments.
- Progress, safety, enrollment and meaningful efficacy evidence for COM701, COM902 and Bayer’s BAY 1905254 program.
- Potential collaboration milestones, royalties and termination rights; milestone amounts described as eligible or potential are not assured revenue.
- Future financing and dilution exposure, including outstanding warrants and employee options, and the impact of increased shares outstanding.
- Effects of outsourcing and workforce reductions on research execution, internal expertise, manufacturing supply and program timelines.
- Current PFIC status and applicable U.S. tax implications for shareholders; the filing’s PFIC assessment is annual and fact-dependent.