Cognition Therapeutics, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Cognition is a clinical-stage biopharmaceutical company developing CNS and retinal disease therapies, with CT1812 as its lead candidate. It had no product-sales revenue; reported grant income comes from reimbursable research costs.
Key financial results
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Research and development expense | $9.1 million | $4.9 million | $15.6 million | $9.3 million |
| General and administrative expense | $3.1 million | $1.1 million | $6.0 million | $2.2 million |
| Total operating expenses | $12.2 million | $6.0 million | $21.6 million | $11.6 million |
| Grant income | $6.4 million | $4.6 million | $12.3 million | $9.3 million |
| Net loss | $5.8 million | $1.5 million | $9.6 million | $1.3 million |
| Net loss per share, basic and diluted | $0.25 | $4.77 | $0.43 | $6.53 |
| Cash used in operating activities | Not separately reported by quarter | $8.3 million | $1.7 million |
Amounts are in U.S. dollars. The per-share comparison is affected by the 2021 capital structure and share count; in 2021, net loss attributable to common stockholders included cumulative preferred dividends.
Financial position and liquidity
- At June 30, 2022, cash and cash equivalents were $45.8 million, down from $54.7 million at December 31, 2021. Total assets were $52.8 million; total liabilities were $8.9 million; stockholders’ equity was $43.9 million.
- Current assets were $50.7 million and current liabilities were $6.8 million. Grant receivables totaled $3.3 million.
- Six-month investing cash use was $0.1 million, primarily for equipment. Financing cash use was $0.5 million, including $0.8 million of loan payments, partly offset by option-exercise proceeds.
- No significant conventional borrowing balance is reported, but $0.4 million remained outstanding on insurance-premium financing. Operating lease liabilities totaled $0.6 million.
- Management stated that available cash and expected grant income were expected to fund operating expenses and capital requirements into Q4 2023; the notes also state cash was expected to fund at least one year beyond the filing date. Additional funding will be needed beyond that period.
Material changes and management commentary
- Six-month operating expenses rose $10.1 million year over year. R&D increased $6.3 million, largely from greater Phase 2 clinical-trial and contract research organization activity; G&A increased $3.8 million, including public-company costs, personnel, professional fees, insurance, and stock compensation.
- Clinical-program R&D spending increased, while manufacturing costs declined because of the timing of production of preclinical and clinical materials.
- Management reported August 2022 analyses of available SPARC-study cerebrospinal-fluid samples (18 of 23 enrolled participants). It described changes in biomarkers including YKL-40 and clusterin as consistent with a potential effect on disease biology and CT1812’s proposed mechanism. These biomarker findings are not evidence of demonstrated clinical efficacy.
- The company reported approximately $168.9 million in cumulative grant awards, primarily from the National Institute on Aging. Awards have project periods extending through May 2025, subject to extension; the timing and availability of future grant funding are not assured.
- Management expects significant expenses and net losses to continue and does not expect product-sales revenue unless and until a candidate is approved and commercialized. Potential funding sources include grants, equity or debt offerings, collaborations, strategic alliances, and licensing.
Risks, contingencies, and unusual items
- CT1812 and other candidates depend on successful clinical development, regulatory review, and eventual commercialization. Trials may be delayed or affected by enrollment challenges, COVID-19, geopolitical conditions, inflation, or third-party research and manufacturing performance.
- The company may need additional capital and may not obtain it on acceptable terms or at all. Equity financing could dilute shareholders; collaborations or licenses could require relinquishing valuable rights.
- The company relies on third parties to manufacture drug supply and conduct development activities and has no owned manufacturing facilities.
- There was no material litigation or contingency loss identified as reasonably possible at June 30, 2022. The filing reported no material change to the risk factors in its 2021 annual report.
- Adoption of lease accounting in January 2022 brought operating lease assets and liabilities onto the balance sheet; management said the adoption did not materially affect operations or cash flows. The Q2 2022 income-tax benefit of $0.1 million reflected reversal of a prior-period state-tax estimate.
Investor verification priorities
- Confirm the clinical status, trial timelines, and later results for CT1812; distinguish biomarker observations from clinical outcomes.
- Check cash burn, grant receipts and receivables, grant-award terms, and whether the stated runway remains current.
- Assess future financing needs, potential dilution, and the availability and terms of grants or partnerships.
- Monitor growth in clinical-trial, manufacturing, and public-company expenses, as well as third-party execution and trial-enrollment risks.