CytomX Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. CytomX is a clinical-stage oncology biotechnology company developing investigational antibody therapies using its Probody platform. It had no approved products or product-sale revenue; revenue came principally from collaboration and license arrangements.
Key financial results
Amounts in millions, except per-share data. Results compare with the same 2019 period.
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $16.6 | $9.0 | $66.2 | $38.5 |
| Research and development | $24.1 | $30.8 | $66.9 | $67.2 |
| General and administrative | $8.7 | $9.4 | $18.3 | $19.1 |
| Operating loss | $(16.1) | $(31.2) | $(18.9) | $(47.8) |
| Net loss | $(15.7) | $(29.0) | $(3.5) | $(43.1) |
| Net loss per share | $(0.34) | $(0.64) | $(0.08) | $(0.95) |
| Operating cash flow | Not separately presented for the quarter | $47.4 | $(87.7) |
Q2 operating margin was approximately negative 97% (operating loss divided by revenue); six-month operating margin was approximately negative 29%. These are not product gross margins. Six-month net loss was substantially lower than operating loss mainly because of a $13.9 million income-tax benefit under the CARES Act, following the recognition of a tax refund receivable for 2018 taxes.
Liquidity, liabilities and cash flow
- At June 30, 2020, cash and cash equivalents were $291.4 million and short-term investments were $55.0 million, totaling $346.4 million. Total current assets were $366.6 million and current liabilities $98.8 million (approximately 3.7x current coverage).
- Cash, cash equivalents and restricted cash increased $103.0 million in the first six months. Operating cash flow was positive largely because deferred revenue rose $64.0 million, including the Astellas upfront payment and an AbbVie milestone; this does not represent recurring cash generation from product sales.
- Total liabilities were $343.7 million, including $294.3 million of deferred revenue and $26.3 million of operating lease liabilities. The filing reports no borrowings or financial debt. Deferred revenue reflects collaboration obligations to be recognized over time, not debt financing.
- Accumulated deficit was $420.7 million. Stockholders’ equity was $58.8 million. The company expects existing capital resources to fund operations for at least 12 months from issuance of the statements, but says it will need to raise additional funds in the future.
- A $75 million at-the-market equity sales agreement was in place; no shares had been sold under it through June 30, 2020. The company received $3.7 million from option exercises and employee stock purchases during the six-month period.
Material changes and drivers
- Revenue rose 84% in Q2 and 72% for the first six months. The six-month increase was primarily driven by $26.6 million of revenue recognized from AbbVie’s $40 million CX-2029 dose-escalation milestone. The milestone was earned in March 2020; the remaining amount is deferred.
- Astellas contributed $4.2 million of Q2 revenue and $4.6 million for the six months, as the $80 million upfront fee is recognized over an estimated five-year period. Astellas agreement deferred revenue was $75.6 million at quarter-end.
- Bristol Myers Squibb (BMS) revenue was $7.4 million in Q2, essentially unchanged year over year, and $24.8 million for the six months, down from $32.9 million. The comparison reflects $17.4 million of accelerated revenue recognized in Q1 2019 after BMS terminated three target programs, partly offset by a $10 million milestone recognized in Q1 2020.
- Q2 R&D expense declined $6.8 million year over year, including lower clinical activity and absence of 2019 UCSB-related fees. Six-month R&D was nearly flat: prior-year technology-acquisition costs and lower clinical activity were largely offset by higher license-related costs, including a $6 million UCSB sublicense fee tied to Astellas and a $3 million ImmunoGen milestone for CX-2009.
- Q2 net loss narrowed to $15.7 million from $29.0 million. The six-month comparison also reflects the 2020 tax benefit; the company continued to report operating losses.
Pipeline, outlook and risks
- COVID-19 disrupted research and clinical operations. CytomX temporarily paused new enrollment and site activation in the CX-2009 Phase 2 study in March, with re-initiation expected in the second half of 2020. Management also expected CX-2009 Phase 2 expansion in triple-negative breast cancer, including monotherapy and combination with CX-072, in the second half of 2020.
- The company terminated the CX-072 plus ipilimumab melanoma Phase 2 study after reassessing the competitive, clinical and commercial landscape, alongside pandemic effects, and redirected resources toward other programs.
- With AbbVie, CytomX expected to initiate CX-2029 Phase 2 expansion cohorts in the second half of 2020 in squamous non-small-cell lung, head and neck squamous-cell, esophageal and diffuse large B-cell lymphomas. The CX-2029 CD71 program was in Phase 1/2.
- Management reported that the Amgen EGFR program completed clinical-candidate characterization and moved to IND-enabling work earlier than planned. CytomX targeted an IND filing for CX-904 in late 2021 and expected to lead its filing and early clinical development.
- COVID-19 could further delay enrollment, site activation, trial monitoring, manufacturing and supply, and partner programs; the eventual financial impact was not reasonably estimable. The company relies on third parties for clinical trials and manufacturing and has no manufacturing facilities of its own.
- Clinical and platform risks include uncertain efficacy and safety, adverse events, patient recruitment, regulatory outcomes, competition, and the possibility that early or preliminary trial data may change. The filing discusses anemia and neutropenia in CX-2029 and ocular toxicity in CX-2009.
- Two legal matters were disclosed: a patent-infringement suit by Vytacera Bio seeking unspecified damages and a putative securities class action concerning statements about CX-072 and CX-2009. CytomX said it believes both claims are without merit and recorded no accrual for either as of June 30, 2020.
- The company reported effective disclosure controls and procedures and no material change in internal control over financial reporting during the quarter.
Investor verification priorities
- Confirm trial restart and enrollment progress for CX-2009 and timing of the planned CX-2029 expansion cohorts, given pandemic-related delays.
- Track clinical safety and efficacy data for CX-2009, CX-2029 and partnered programs; assess whether reported preliminary results hold as follow-up matures.
- Reconcile collaboration revenue and cash receipts: 2020 results included milestone and upfront-payment effects, while $294.3 million of deferred revenue remains subject to performance obligations.
- Monitor operating cash burn and funding needs against management’s 12-month liquidity statement; verify any subsequent ATM sales or other financing and potential dilution.
- Follow the Vytacera patent case and securities class action for potential costs, outcomes or effects on operations and investor disclosures.