CytomX Therapeutics, Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. The unaudited filing was signed November 7, 2023. CytomX is a clinical-stage oncology biopharmaceutical company developing conditionally activated biologics using its Probody platform; it has no products approved for sale.
Financial performance and liquidity
Amounts below are in millions of dollars unless noted.
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $26.4 | $11.1 | $74.6 | $33.0 |
| Research and development expense | $16.4 | $30.4 | $58.3 | $92.1 |
| General and administrative expense | $6.8 | $10.5 | $22.2 | $32.8 |
| Operating income (loss) | $3.1 | $(29.7) | $(5.9) | $(91.8) |
| Net income (loss) | $3.0 | $(29.1) | $(1.4) | $(90.5) |
| Operating cash flow | Not stated separately | Not stated separately | $(34.1) | $(109.4) |
- Revenue increased 137% year over year in Q3 and 126% for the first nine months. Q3 2023 operating margin was approximately 11.8%; nine-month operating margin was approximately negative 7.9%.
- Q3 interest income was $2.7 million, versus $0.6 million a year earlier; nine-month interest income was $7.3 million, versus $0.9 million. Nine-month pretax income was $1.4 million, but a $2.8 million tax provision resulted in a net loss.
- At September 30, cash and cash equivalents were $26.0 million and short-term investments were $168.1 million, totaling approximately $194.1 million. Cash and equivalents were $193.7 million at December 31, 2022; the decrease largely reflects purchases of short-term investments, not operating cash use alone.
- Total assets were $221.2 million and total liabilities $272.4 million; stockholders’ deficit was $51.2 million. Liabilities included $236.7 million of deferred revenue and lease liabilities. The filing reports no interest-bearing debt balance.
- Cash used in investing activities was $163.5 million, principally reflecting purchases of short-term investments, partly offset by maturities. Financing provided $30.0 million, mainly from the July private placement.
Changes and operating context
- The increase in revenue reflected higher progress-based revenue under the Bristol Myers Squibb (BMS) collaboration, new Regeneron and Moderna preclinical work, and a $5.0 million Astellas clinical-candidate milestone recognized in Q1. AbbVie revenue declined following termination of its CX-2029 collaboration.
- R&D and G&A expenses fell substantially year over year, primarily due to the 2022 workforce reduction of approximately 40%, reduced activity in CX-2009 and CX-2029, lower vendor costs, and a headquarters sublease. R&D also included credits of $0.7 million for CX-072 trial reconciliation and $0.6 million for CX-2009 close-out activities.
- Deferred revenue declined from $301.3 million at year-end 2022 to $236.7 million at September 30, 2023 as collaboration revenue was recognized. The largest partner balances were BMS ($133.5 million), Astellas ($34.7 million), Moderna ($29.1 million), and Regeneron ($25.9 million).
- The July 2023 private placement generated approximately $29.7 million net and included pre-funded warrants for up to 14.4 million shares and additional warrants for up to 11.5 million shares. These securities create potential dilution.
Outlook, risks, contingencies, and unusual items
- Management estimated existing capital resources would fund operations into the second half of 2025, based on its operating plan. The company also said it expects to need additional funding; there is no assurance financing will be available on acceptable terms. This is management’s estimate, not a guarantee.
- Management anticipated initial CX-904 Phase 1 dose-escalation data in the first half of 2024 and planned IND submissions for wholly owned CX-2051 and CX-801 by the end of 2023. These are forward-looking plans and depend on clinical, regulatory, and manufacturing execution.
- After quarter-end, the company disclosed that it would make no further substantial near-term investment in CX-2029. It also reported an October 2023 production failure at a CX-2051 contract manufacturer, potentially affecting development timing; CytomX said it was taking steps to secure supply.
- In August 2023, CytomX regained exclusive worldwide CX-2029 rights under a transition agreement with AbbVie Global. Future obligations include tiered royalties to AbbVie and potential development, regulatory, and commercial milestones and royalties to Seagen. AbbVie had decided not to advance CX-2029 into additional studies.
- California tax authorities proposed approximately $2.8 million in taxes and penalties relating to the company’s 2017–2018 revenue apportionment. CytomX recorded the provision and said it plans to contest the assessment; timing of resolution is uncertain.
- A patent-infringement case brought by Vytacera seeks unspecified damages. The company recorded no liability, stating it does not believe a loss is probable. On October 30, 2023, a magistrate judge recommended dismissal; a district judge’s ruling was still pending.
- Key risks include clinical and regulatory uncertainty, dependence on collaborators and third-party manufacturers, potential supply interruptions, need for additional capital, and dilution from warrants or future financing. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the stated runway into the second half of 2025 remains supported by updated spending, trial plans, collaboration receipts, and financing assumptions.
- The CX-2051 manufacturing failure’s effect on supply, IND timing, and planned trials, and progress toward securing a reliable alternative or replacement supply.
- Clinical progress and data timing for CX-904, CX-801, and CX-2051, as well as collaborator decisions on BMS, Amgen, Astellas, Moderna, and Regeneron programs.
- The potential dilution and exercise terms of the pre-funded and tranche warrants, alongside the company’s future capital-raising needs.
- Developments in the California tax assessment and Vytacera litigation, including the final court ruling on the dismissal recommendation.