Compugen Ltd. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023. This is an annual report, not a standalone fourth-quarter filing. Financial statements are audited and prepared under U.S. GAAP, in U.S. dollars.
Business context
Compugen is a clinical-stage immuno-oncology discovery and development company. It has no products approved for sale and depends on licensing and collaboration income to support development. Its internally pursued clinical programs, COM701 (anti-PVRIG) and COM902 (anti-TIGIT), are in Phase 1 studies. AstraZeneca is developing rilvegostomig, a PD-1/TIGIT bispecific incorporating a component derived from COM902; it entered Phase 3 in December 2023. COM503, an IL-18 binding protein program, was licensed to Gilead and was in IND-enabling work at year-end.
Financial performance and liquidity
| Metric (US$ millions, except per-share data) | FY2023 | FY2022 |
|---|---|---|
| Revenue | 33.459 | 7.500 |
| Cost of revenue | 2.004 | 0.975 |
| Gross profit | 31.455 | 6.525 |
| Research and development expense | 34.472 | 30.648 |
| Total operating expenses | 44.447 | 41.899 |
| Operating loss | (12.992) | (35.374) |
| Financial and other income, net | 3.208 | 1.738 |
| Income taxes | 8.970 | 0.058 |
| Net loss | (18.754) | (33.694) |
| Basic and diluted loss per share | (0.21) | (0.39) |
| Net cash used in operating activities | (35.886) | (34.113) |
Revenue included $10 million from an AstraZeneca clinical milestone and $23.459 million recognized from the Gilead license transaction. The latter was part of Gilead’s $60 million upfront payment; the filing reports $9 million withheld at source, leaving $51 million net. The remaining transaction consideration was recorded as deferred revenue and is recognized as Compugen performs specified activities. FY2023 gross margin was approximately 94% (calculated from reported revenue and cost of revenue).
R&D spending increased 12% year over year, while marketing and business development expense fell 74% to $0.244 million and G&A declined 6% to $9.731 million. Higher collaboration revenue and financial income reduced the operating and net losses; the $8.970 million tax expense was primarily withholding tax on Gilead’s upfront payment. The company reported an accumulated deficit of $474.527 million.
At December 31, 2023, cash and cash equivalents were $13.890 million, short-term bank deposits $25.053 million, and marketable securities $11.742 million, totaling approximately $50.7 million of liquid financial assets as defined by management; restricted cash was an additional $0.365 million. The balance sheet also included a $61 million Gilead trade receivable. Current assets were $114.579 million and current liabilities $26.266 million. The filing reports no borrowings; operating lease liabilities totaled $1.351 million, with $0.632 million current. Total liabilities were $55.775 million and shareholders’ equity $65.559 million.
Operating cash use was $35.886 million. Investing activities provided $35.510 million, chiefly reflecting movements in deposits and marketable securities; financing activities provided $3.081 million, primarily from ATM share sales. Year-end shares outstanding were 89,237,465, up from 86,624,643 a year earlier.
Material changes and notable items
- Revenue rose to $33.459 million from $7.5 million, reflecting the Gilead license and a larger AstraZeneca milestone. Gilead revenue recognition involved significant judgment in allocating the $60 million transaction price among performance obligations; the auditor identified this as a critical audit matter.
- Gilead’s December 2023 agreement provides a $30 million milestone upon COM503 IND clearance, up to approximately $758 million in further development, regulatory and commercial milestones, and tiered single-digit to low-double-digit royalties. Compugen is to conduct and fund the Phase 1 trial; Gilead supplies an anti-PD-1/PD-L1 antibody at no cost. Gilead is expected to take over development after Phase 1. The agreement restricts Compugen from pursuing other IL-18-directed work during its term.
- AstraZeneca’s rilvegostomig Phase 3 start triggered a $10 million milestone in 2023. Compugen may receive further milestones and tiered royalties; AstraZeneca controls the program’s development and may terminate the license for convenience.
- The Bristol Myers Squibb collaboration ended in August 2022 and the Bayer agreement ended in February 2023. Rights to bapotulimab reverted to Compugen, which may resume its development, but the filing does not describe a current development plan for it.
- Compugen reported preliminary clinical signals for COM701 combinations and preliminary stable disease with COM902 monotherapy. These are early-stage results and are not evidence of established efficacy; interim and biomarker findings may change. It completed enrollment of 20 patients in the MSS colorectal cancer triplet study and expected enrollment in the platinum-resistant ovarian cancer study to finish in Q1 2024.
- Management estimated that existing resources, together with the expected COM503 IND-clearance milestone, would fund operations into 2027 under current plans. This estimate excludes possible additional licensing proceeds or financings and depends on expected IND clearance in the second half of 2024. Management expected 2024 R&D expense to remain at a similar level to 2023 and to represent about 80% of operating expenses.
Outlook, risks and contingencies
- Clinical and regulatory risk: COM701 and COM902 remain early-stage; COM503 had not entered clinical testing. Trials may fail, enrollment or manufacturing may be delayed, and preliminary data may not predict later outcomes. There are no approved products or established product-sale revenues.
- Financing and collaboration dependence: The company expects continuing losses and may need additional capital. Its runway estimate relies in part on the COM503 milestone and could shorten if plans change; equity financing could dilute shareholders. Collaboration partners may change priorities or terminate agreements.
- Concentration: Two customers accounted for 30% and 70% of FY2023 revenue, respectively; one customer accounted for all reported revenue in each of 2022 and 2021. Revenue therefore remains dependent on a small number of partner milestones and license arrangements.
- Israel, currency and operations: Headquarters and R&D are in Israel. Management said the October 2023 war had not materially affected operations as of the report, but ongoing conflict, employee military service, cyber threats, inflation and NIS movements could disrupt activity or increase costs. A 10% dollar depreciation against the NIS was estimated to increase annual net loss by about $1.4 million.
- Other exposures: Risks include competition in immuno-oncology and computational drug discovery, third-party manufacturing and clinical trial reliance, intellectual property challenges, privacy and cybersecurity incidents, and Israeli Innovation Authority obligations. The company reported approximately $9.0 million of contingent IIA royalty obligations at year-end, subject to qualifying future revenue. Three European patent oppositions involving PVRIG-related patents remained unresolved or potentially appealable.
- Capital markets and taxes: The share price ranged from $0.53 to $2.00 in 2023. The company regained Nasdaq minimum-bid-price compliance in January 2024 after prior notices. Management believed Compugen was a PFIC for 2023, a determination made annually and subject to uncertainty.
- Controls and legal matters: The auditor issued unqualified opinions on the financial statements and internal control over financial reporting; management also concluded controls were effective. The filing states there were no material pending or known contemplated legal proceedings.
Investor facts to verify
- Confirm the timing and receipt of the $30 million COM503 IND-clearance milestone, the IND status, and the actual net cash impact of Gilead withholding and other taxes.
- Track cash, deposits, marketable securities, the $61 million year-end receivable, deferred-revenue recognition, operating cash use, and management’s runway assumptions.
- Review updated clinical data and enrollment for the COM701/COM902/pembrolizumab studies, including whether preliminary responses persist and whether safety findings change.
- Monitor AstraZeneca’s rilvegostomig Phase 3 progress, subsequent milestone eligibility, and any changes to either active collaboration.
- Check future financing and ATM share sales, dilution, Nasdaq listing compliance, and the company’s annual PFIC determination; consult a tax adviser regarding U.S. tax consequences.