CytomX Therapeutics, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018. Financial statements are unaudited. CytomX is a clinical-stage oncology biopharmaceutical company developing antibody therapeutics using its Probody platform; it has no approved products and generated no product-sales revenue.
Financial performance and liquidity
| Metric | Q1 2018 | Q1 2017 / comparator |
|---|---|---|
| Total revenue | $14.2 million | $11.7 million |
| Research and development expense | $22.5 million | $14.6 million |
| General and administrative expense | $7.4 million | $5.7 million |
| Operating loss | $15.6 million | $8.6 million |
| Net loss | $15.5 million | $8.3 million |
| Net loss per share, basic and diluted | $0.40 | $0.23 |
| Net cash used in operating activities | $14.6 million | $19.1 million |
At March 31, cash and cash equivalents were $142.2 million and short-term investments were $219.3 million, totaling approximately $361.5 million in liquid resources. Total current assets were $367.0 million; current liabilities were $69.7 million. The balance sheet reports no borrowings or other financial debt; liabilities were principally deferred collaboration revenue. Accumulated deficit was $245.9 million. The company reported that current resources were expected to fund planned operations into 2020, while cautioning that spending and available runway could vary.
Cash, cash equivalents and restricted cash fell $35.4 million during the quarter. Investing cash outflow was $23.4 million, mainly reflecting purchases of short-term investments; this largely reflects investment allocation rather than operating burn. No meaningful product gross margin is reported because the company has no product sales.
Material changes and notable items
- Revenue increased $2.5 million year over year, while operating expenses increased $9.5 million and net loss widened $7.2 million. R&D expense rose $7.9 million, driven by clinical and preclinical work, trial startup and personnel costs.
- Revenue was primarily collaboration-related: BMS $8.2 million, AbbVie $2.7 million, Amgen $1.3 million, Pfizer $1.4 million and ImmunoGen $0.7 million. BMS revenue rose with recognition of its collaboration upfront payment; ImmunoGen revenue declined from a prior-year license-related recognition item.
- ASC 606 was adopted January 1, 2018 using the modified retrospective method. It increased deferred revenue and accumulated deficit at adoption by approximately $10.9 million. For Q1, reported revenue was $14.2 million versus $12.6 million under the former standard; reported net loss was $15.5 million versus $17.2 million under the former standard. These are accounting-timing changes, not equivalent changes in cash receipts.
- Deferred revenue was $302.0 million at quarter-end, including $230.0 million related to BMS. This represents obligations to perform services over future periods, not debt or immediately available cash.
- Interest income increased to $1.4 million from $0.2 million, principally reflecting the investment balance and investment accretion. The company recorded $1.1 million of income tax expense, primarily due to tax and U.S. GAAP timing differences associated with collaboration revenue.
Outlook, risks and contingencies
- Management expected initial CX-072 clinical data in mid-2018 and initial CX-2009 data in the second half of 2018. It expected to initiate a CX-2029 trial in Q3 2018 following an April IND submission, and anticipated filing an IND for CX-188 in the second half of 2018. These are forward-looking plans, subject to clinical, regulatory and operational conditions.
- R&D costs and losses were expected to rise as trials advance and new programs enter clinical development. Management said additional funding would be needed in the future; financing may not be available on acceptable terms and could dilute shareholders or constrain the business.
- Pfizer terminated its collaboration in March 2018 after ending its remaining target programs. CytomX recognized $1.1 million of remaining deferred revenue following termination; future payments under that agreement will no longer be available.
- ImmunoGen announced closure of its clinical manufacturing facility by year-end 2018, which had supported CX-2009. CytomX had begun transferring drug-substance manufacturing to another contract manufacturer, but warned of possible supply disruption. The company also relies on third parties for clinical and preclinical manufacturing and trial execution.
- Key risks include early-stage clinical uncertainty and potential safety issues, enrollment delays, dependence on collaborators and vendors, manufacturing and supply continuity, competition, intellectual-property disputes, and the need for future capital. The company reported no material legal proceedings and no material change in contractual obligations. Management concluded disclosure controls were effective as of March 31, 2018.
Most important facts for investors to verify
- Whether the stated clinical data, IND and trial-start timelines were achieved, and what subsequent safety and efficacy data show.
- Whether the reported runway into 2020 remains supportable as clinical spending increases, including the timing and terms of any financing.
- How ASC 606 affects collaboration revenue recognition and deferred-revenue balances in subsequent periods; distinguish accounting revenue from cash receipts.
- Whether the CX-2009 manufacturing transfer was completed without material delay, cost increase or supply interruption.
- Whether collaborators advance programs and trigger milestones; milestone amounts cited in agreements are contingent and were not included in the reported transaction price where significant reversal remained possible.