COMPASS Pathways plc — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. The unaudited financial statements are prepared under U.S. GAAP and presented in U.S. dollars. COMPASS is a clinical-stage mental health company developing COMP360 psilocybin therapy, administered with psychological support. It has no approved products and has generated no revenue.
Financial performance and liquidity
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $19.0 million | $15.4 million |
| General and administrative expense | $12.8 million | $10.1 million |
| Total operating expenses / operating loss | $31.8 million | $25.4 million |
| Net loss | $24.2 million | $21.2 million |
| Net loss per share, basic and diluted | $0.57 | $0.50 |
| Net cash used in operating activities | $27.7 million | $23.1 million |
Other income was $7.7 million, including a $4.3 million UK R&D tax credit benefit, $2.7 million in foreign-exchange gains and $0.7 million in other income, primarily interest. Comprehensive loss was $24.8 million, compared with $28.4 million in Q1 2022; the prior-year period included a larger foreign-currency translation loss.
Cash and cash equivalents were $117.1 million at March 31, 2023, down from $143.2 million at December 31, 2022; restricted cash was $0.3 million. Current assets were $167.8 million and current liabilities $11.3 million, though current assets include substantial prepayments and tax-credit receivables. Total liabilities were $11.7 million, including $1.5 million of operating lease liabilities; the filing reports no borrowings. Accumulated deficit was $285.4 million.
Changes versus the prior comparable period
- Operating expenses rose $6.4 million, or about 25%, and net loss increased $3.0 million. R&D expense rose $3.7 million, mainly from development costs and increased staffing; G&A expense rose $2.7 million, principally from personnel and facilities costs, partly offset by lower legal and professional fees.
- Operating cash use increased $4.6 million. Cash, cash equivalents and restricted cash declined by $26.0 million during the quarter, including a positive $0.7 million exchange-rate effect.
- On January 1, 2023, the parent and a financing subsidiary changed their functional currency from sterling to U.S. dollars, citing the expected shift in financing and cash flows. Foreign-currency remeasurement contributed to reported gains.
Programs, outlook and key risks
- TRD: Phase 3 pivotal trial COMP005 (n=255; single 25 mg dose versus placebo) had expected top-line results in summer 2024. COMP006 (n=568; repeat-dose arms of 25 mg, 10 mg and 1 mg) had expected top-line results by mid-2025. Both use change in MADRS score at week 6 as the primary endpoint. The company said it was continuing with its previously announced design after receiving FDA feedback on protocol amendments.
- Other studies: A Phase 2 study in major depressive disorder began in Q1 2023. Phase 2 studies in anorexia nervosa and PTSD are ongoing. Recruitment and screening challenges in the anorexia nervosa study led the company to amend the protocol; results previously expected in 2023 were no longer expected in 2023.
- Funding outlook: Management expected cash at March 31 plus subsequent ATM proceeds through May 10 to fund operating and capital needs for at least 12 months. It also said substantial additional funding will be needed to complete development and commercialization, and actual cash needs may exceed estimates. The ATM permits up to $150 million of ADS sales; $1.6 million in net proceeds had been raised through March 31, and a further $26.9 million was raised through May 10 from 2.82 million ADSs. The filing reported 45.62 million shares outstanding as of May 9.
- Costs and tax credits: Management expected R&D spending to continue increasing as Phase 3 and other programs advance. UK SME R&D tax-credit rates for qualifying expenditure were reduced effective April 1, 2023; the company said eligibility for a newly announced enhanced rate remained uncertain.
- Principal risks: Clinical-trial failure or delay, enrollment and therapist availability, regulatory approval and controlled-substance scheduling, safety and public acceptance, reliance on third-party manufacturers and trial sites, intellectual-property challenges, competition, and the need for additional financing. Market volatility, inflation, interest rates, foreign exchange and banking-system disruption could also affect funding and operations.
- The company reported no material litigation or contingency reserves. Management concluded disclosure controls were effective as of March 31, 2023 and reported no material quarter-end change in internal control over financial reporting.
Important facts for investors to verify
- Whether COMP005 and COMP006 remain on schedule and what final trial data show on efficacy and safety.
- Whether recruitment issues continue to delay anorexia nervosa research and how the MDD, anorexia nervosa and PTSD studies progress.
- Cash burn, the assumptions behind the stated 12-month runway, future capital requirements and any further ATM issuance or dilution.
- FDA requirements and the timing and feasibility of controlled-substance scheduling, site access, therapist training and commercial supply.
- The amount and timing of future UK R&D tax-credit recoveries under revised rules, and the effect of foreign-exchange movements on reported results.