COMPASS Pathways plc — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. Filed February 28, 2023. COMPASS Pathways is a clinical-stage mental health company developing COMP360 psilocybin therapy with psychological support; it has no approved products and has not generated revenue.
Financial performance and position
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $65.1 million | $44.0 million |
| General and administrative expense | $45.4 million | $39.2 million |
| Total operating expenses | $110.4 million | $83.2 million |
| Net loss | $91.5 million | $71.7 million |
| Net loss per share, basic and diluted | $2.16 | $1.79 |
| Net cash used in operating activities | $105.5 million | $67.7 million |
| Cash and cash equivalents at year-end | $143.2 million | $273.2 million |
Revenue-based margins are not meaningful because the company has no revenue. The balance sheet reported $191.7 million in current assets and $15.6 million in current liabilities; total liabilities were $16.0 million, including lease liabilities. No borrowings or convertible notes were reported outstanding at year-end. Shareholders’ equity was $181.3 million.
FY 2022 comprehensive loss was $117.2 million, including a $25.7 million foreign-currency translation loss. Operating cash use increased year over year, while cash fell by $130.0 million; the cash-flow statement also shows a $25.0 million adverse effect from exchange-rate changes. The company recorded $14.4 million of UK R&D tax-credit benefit, versus $9.6 million in 2021. PwC issued an unqualified opinion on the financial statements; the R&D tax credit was identified as a critical audit matter.
Material changes and operating developments
- Net loss widened by $19.8 million as operating expenses rose $27.2 million. R&D expense increased $21.0 million, reflecting development activity, staffing, share-based compensation and other costs; G&A expense increased $6.2 million.
- Operating cash use rose $37.7 million year over year. The company attributed a substantial working-capital outflow to higher prepaid expenses and other current assets, including prepaid R&D and the R&D tax-credit receivable.
- The Phase 2b TRD trial results were published in The New England Journal of Medicine in November 2022. For the 25 mg dose, the trial reported a week-3 MADRS difference of 6.6 points versus 1 mg (p<0.001), with 29.1% in remission versus 7.6% in the 1 mg group.
- The company commenced its Phase 3 TRD program. COMP005 is designed to enroll 255 participants and compare a single 25 mg dose with placebo; COMP006 is designed to enroll 568 participants and evaluate repeat-dose arms. Both use change in MADRS score at week 6 as the primary endpoint.
Outlook, commentary and key risks
Management expects the $143.2 million year-end cash balance to fund operating expenses and capital requirements for at least 12 months, based on assumptions that may prove incorrect. It also expects substantial additional funding will be needed and that expenses will rise as Phase 3 and other development programs advance. No revenue or profitability guidance was provided.
- Management expected top-line results from COMP005 in summer 2024 and COMP006 by mid-2025. Protocol amendments, including changes to COMP005’s sample-size estimate and long-term follow-up, were submitted to the FDA in January 2023; FDA feedback was expected by March 20, 2023.
- Recruitment and screening challenges in the anorexia nervosa Phase 2 trial prompted planned protocol changes; the company no longer expected data in 2023. Data from the 20-participant PTSD study were expected by the end of 2023.
- In the Phase 2b trial, 12 participants reported treatment-emergent serious adverse events. Suicidal ideation, behavior and intentional self-injury occurred across dose groups; the company reported that its post-hoc review did not establish a causal relationship with COMP360. Continued safety assessment is important.
- COMP360 contains a controlled substance. Commercialization in the U.S. would require FDA approval and DEA scheduling, while UK and other jurisdictions have separate controlled-drug requirements. Approval, scheduling, supply, qualified therapist availability, treatment-site capacity and reimbursement are material uncertainties.
- The company relies on third parties for manufacturing, clinical sites and therapists, and relies on a single API supplier, with backup suppliers identified. It also faces financing, competition, intellectual-property and foreign-exchange risks. Patent challenges to two U.S. patents were denied review, but rehearing requests remained pending as of the filing.
- Management reported disclosure controls and internal control over financial reporting were effective as of December 31, 2022. The independent auditor did not provide an internal-control attestation.
Investor verification priorities
- Check subsequent FDA feedback on the COMP005 and COMP006 protocol amendments, final trial designs, enrollment progress and milestone timing.
- Track cash consumption, the timing and receipt of UK R&D tax credits, and financing needs against management’s stated minimum 12-month runway.
- Review full Phase 2b safety data and subsequent trial disclosures, particularly suicidality events, durability of benefit and repeat-dose findings.
- Verify the revised anorexia nervosa trial timeline and the reported PTSD study results.
- Monitor DEA and other jurisdictional scheduling requirements, manufacturing-supplier readiness, reimbursement planning and the status of patent rehearing proceedings.