CytomX Therapeutics, Inc. — FY 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. The filing is an annual report, not a standalone fourth-quarter filing; quarterly figures below are unaudited. CytomX is a clinical-stage oncology company developing Probody antibody therapeutics and has no approved products or product-sales revenue.
Financial performance and position
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | $71.6 million | $15.0 million |
| Operating expenses | $117.9 million | $74.6 million |
| Operating loss | $46.3 million | $59.6 million |
| Net loss | $43.1 million | $58.9 million |
| Net loss per share, basic and diluted | $1.16 | $1.63 |
| Research and development expense | $92.3 million | $54.8 million |
| General and administrative expense | $25.6 million | $19.9 million |
- Revenue rose about 376%, principally from collaboration payments and recognition of upfront, milestone, and license-related amounts—not product sales. 2017 revenue included $36.5 million from BMS, $19.4 million from AbbVie, $12.5 million from ImmunoGen, $1.3 million from Amgen, and $1.9 million from Pfizer.
- R&D expense increased about 69% as programs advanced, clinical activity expanded, and collaboration-related costs were incurred. G&A expense increased about 29%.
- Fourth quarter: revenue was $27.1 million and net income was $0.6 million, or $0.02 per share, compared with revenue of $6.3 million and a net loss of $14.0 million in Q4 2016. Quarterly results are unaudited; collaboration revenue can make quarterly earnings volatile.
- Liquidity: cash, cash equivalents, and short-term investments totaled $374.1 million at year-end 2017, versus $181.9 million a year earlier. Working capital was $327.5 million; current assets were $388.6 million and current liabilities $61.1 million.
- Cash flow: operating activities provided $170.4 million, versus $2.0 million used in 2016. This was driven primarily by a $189.9 million increase in deferred revenue following collaboration upfront payments, and should not be read as recurring operating cash generation. Investing activities used $121.3 million; financing activities provided $23.8 million, including $20.0 million from Amgen’s share purchase.
- Debt: no long-term debt was outstanding at year-end. Total liabilities of $327.7 million included $305.3 million of deferred revenue, not equivalent to interest-bearing borrowing.
- No product gross margin is available because the company had no product sales. Operating and net losses remain substantial relative to collaboration revenue.
Material changes versus the prior year
- 2017 revenue increased by $56.6 million while net loss narrowed by $15.8 million. Higher collaboration revenue more than offset increased operating expenses.
- BMS expanded its collaboration and paid a $200.0 million upfront amount; CytomX also received a $40.0 million upfront payment from Amgen. These amounts substantially increased deferred revenue and liquidity. Amgen separately purchased $20.0 million of CytomX common stock.
- Clinical development broadened: wholly owned CX-072 (PD-L1) and CX-2009 (CD166) were in Phase 1/2 trials; BMS’s CTLA-4 Probody candidate entered Phase 1/2 in 2018. CX-2029 (CD71) and CX-188 (PD-1) remained preclinical/IND-enabling at filing.
- Common shares outstanding increased to 38.5 million at December 31, 2017 from 36.5 million a year earlier, including Amgen’s 1.16 million-share purchase.
Outlook, risks, and unusual items
- Management expected existing capital resources to fund planned operations into 2020, while cautioning that spending was expected to rise substantially in 2018 as clinical trials and IND-enabling work progressed. The company expects continued losses and does not anticipate product-sales revenue in the foreseeable future.
- Management expected initial CX-072 clinical data in mid-2018 and CX-2009 data in the second half of 2018; it planned to file an IND for CX-2029 in the first half of 2018 and CX-188 in the second half. These are forward-looking plans, not assured outcomes.
- On March 6, 2018, Pfizer notified CytomX it was terminating its collaboration, effective 60 days later. CytomX consequently lost eligibility for up to $263.5 million in potential contingent payments, royalties, and research fees. No early termination penalty was disclosed.
- ImmunoGen announced closure of the clinical manufacturing facility supporting CX-2009 by year-end 2018. CytomX had begun transferring manufacturing to another contract manufacturer, but warned of possible supply disruption.
- Other key risks include early-stage clinical uncertainty, potential toxicity or lack of efficacy, enrollment and regulatory delays, dependence on collaborators and contract manufacturers, intense competition, intellectual-property challenges, and the need for future financing.
- Adoption of the new revenue standard (ASC 606) on January 1, 2018 was expected to increase accumulated deficit by approximately $6 million to $10 million, with a corresponding increase in deferred revenue. This expected accounting adjustment was not part of the reported 2017 results.
- A $10.7 million non-cash in-process R&D charge related to the Amgen agreement was recorded in 2017. The company also recorded a provisional tax-law impact; substantially all deferred tax assets remained subject to a valuation allowance.
- The financial statements received an unqualified audit opinion. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-control audit opinion.
Important facts for investors to verify
- Whether planned clinical data and IND submissions occurred on schedule, and what the resulting safety, activity, and biomarker data showed.
- How much of the $374.1 million liquidity balance remains available after increased clinical spending, and whether the projected runway into 2020 remains supportable.
- The revenue-recognition and cash-flow effects of ASC 606 adoption, including the final opening-equity adjustment and future timing of collaboration revenue.
- The operational and timing impact of transferring CX-2009 manufacturing away from ImmunoGen’s closing facility.
- The practical consequences of Pfizer’s termination and the development progress, funding obligations, milestones, and rights under the BMS, AbbVie, and Amgen collaborations.
- Potential dilution from equity compensation and future financing; the filing reports 6.5 million options outstanding at year-end 2017.