Filing summary
Entity discrepancy: The request identifies Quince Therapeutics, Inc., but the supplied Form 10-Q is for Cortexyme, Inc. (Nasdaq: CRTX). This summary covers the filing provided, for the quarter ended June 30, 2019, filed August 9, 2019.
Business context and reporting period
Cortexyme describes itself as a clinical-stage biopharmaceutical company developing therapies aimed at a proposed infectious cause of Alzheimer’s disease and other degenerative disorders. Its lead candidate, oral drug COR388, entered the global Phase 2/3 GAIN trial in April 2019. The interim financial statements are unaudited; results cover the three and six months ended June 30, 2019, with comparisons to 2018.
Financial results and liquidity
Amounts are in U.S. dollars; financial statement amounts below are in millions except per-share data.
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $7.109 | $2.286 | $11.934 | $4.699 |
| General and administrative expense | $2.466 | $0.357 | $3.716 | $0.704 |
| Net loss | $(9.062) | $(3.108) | $(14.743) | $(6.485) |
| Basic and diluted loss per share | $(0.57) | $(0.93) | $(1.52) | $(1.93) |
| Net cash used in operating activities | Not stated quarterly | Not stated quarterly | $(13.531) | $(5.797) |
No revenue or operating margins were reported. At June 30, 2019, cash and cash equivalents were $44.314 million, short-term investments $83.974 million, and long-term investments $7.988 million. The company reported $128.3 million in cash, cash equivalents, and short-term investments; it separately cited $136.3 million including long-term marketable securities. Total assets were $143.242 million, total liabilities $7.025 million, and accumulated deficit $47.568 million. No debt balance was reported.
For the six months, investing activities used $44.673 million, primarily reflecting investment of IPO proceeds, while financing activities provided $77.896 million, principally from the IPO. Cash, cash equivalents, and restricted cash ended the period at $44.564 million. Management said available cash, cash equivalents, and short-term investments were expected to fund planned operations for at least one year from the filing date.
Material changes and notable items
- Operating expenses increased substantially year over year as COR388 advanced into Phase 2/3 trials. Q2 R&D expense rose 211% and G&A expense rose 591%; six-month R&D and G&A expense rose 154% and 428%, respectively.
- The company attributed higher R&D costs mainly to COR388 clinical-trial and manufacturing activity. Higher G&A costs primarily reflected public-company legal, accounting, professional-service, and personnel expenses.
- In May 2019, Cortexyme completed its IPO, selling 5,073,800 shares at $17 per share for approximately $77.8 million in net proceeds. All outstanding preferred shares converted into 18,161,027 common shares.
- The company adopted the new lease accounting standard in January 2019 and recorded right-of-use assets and lease liabilities. The original related-party office lease liability was extinguished following the IPO; additional space was prepaid.
- Q2 and six-month net losses were partly offset by increased interest income following the IPO. Prior-period interest and derivative-liability expenses did not recur.
Outlook, risks, and contingencies
Management expected COR388 R&D spending to increase substantially as clinical development, manufacturing, and other research efforts continued. The company expected top-line GAIN trial results by the end of 2021, but stated that trial timing and costs depend on enrollment, trial duration, manufacturing, safety, efficacy, and other factors. It anticipated continuing operating losses and could need additional capital; unavailable or inadequate financing could require delaying or reducing development activities.
Disclosure controls and procedures were reported as not effective at June 30, 2019 because of a previously identified material weakness in financial reporting controls. Remediation efforts—including additional financial-reporting personnel and control development—were ongoing, with completion expected during 2019; effectiveness was not assured. The filing reported no material legal proceedings and no material changes to previously disclosed risk factors or contractual obligations. Management said there were no material subsequent events.
Important facts for investors to verify
- Confirm the intended issuer: the supplied filing is Cortexyme’s, not Quince Therapeutics’.
- Review COR388’s Phase 2/3 trial progress, enrollment, safety findings, and the stated end-of-2021 top-line-results target.
- Track operating cash burn, clinical and manufacturing spending, and the assumptions behind management’s cash-runway estimate.
- Assess whether the company remediated the material weakness and whether disclosure controls became effective.
- Review future filings for financing needs, dilution, and any changes in the use of IPO proceeds or development plans.