Cognition Therapeutics, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited consolidated results. Cognition is a clinical-stage biopharmaceutical company developing CNS and retinal therapies, with CT1812 as its lead candidate and a focus on Alzheimer’s disease. It reported no product-sales revenue.
Key financial results
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Research and development expense | $6.5 million | $4.4 million |
| General and administrative expense | $2.9 million | $1.2 million |
| Total operating expenses | $9.4 million | $5.6 million |
| Grant income | $5.9 million | $4.7 million |
| Net income (loss) | $(3.8) million | $0.2 million |
| Net loss attributable to common stockholders | $(3.8) million | $(0.9) million |
| Net loss per common share, basic and diluted | $(0.17) | $(1.64) |
| Operating cash flow | $(3.0) million | $(0.8) million |
Grant income is reported in other income, not product revenue. Profit margins are not meaningful given the lack of product sales and operating losses.
- Liquidity: Cash and cash equivalents were $51.5 million at March 31, 2022, down $3.2 million from year-end 2021. Current assets were $56.4 million and current liabilities $7.6 million, implying working capital of approximately $48.8 million.
- Debt and obligations: The company reported $0.8 million outstanding under an insurance-premium financing agreement, due through September 2022. Operating lease liabilities totaled $0.6 million; undiscounted future lease payments were $0.7 million.
- Other metrics: Accumulated deficit was $97.8 million. Common shares outstanding were 22.6 million at quarter-end. Equity-based compensation was $1.0 million, versus $0.1 million a year earlier.
Material changes versus Q1 2021
- Operating expenses rose $3.8 million. R&D increased $2.1 million, mainly from higher Phase 2 clinical activity and personnel costs, partly offset by lower manufacturing expense. G&A increased $1.7 million, including higher insurance, professional fees, and stock compensation.
- Results shifted from $0.2 million net income to a $3.8 million net loss. The prior-year period included a $1.1 million derivative-liability fair-value gain and a $0.4 million gain from forgiveness of a Paycheck Protection Program loan; neither recurred in Q1 2022.
- Operating cash use increased to $3.0 million from $0.8 million. Q1 2021 financing cash flow included $8.9 million of SAFE proceeds; Q1 2022 financing cash flow was a $0.1 million use.
Outlook, commentary, risks and unusual items
- Management expects continued significant expenses and losses as it advances clinical and preclinical programs, including CT1812. The company does not expect product-sales revenue unless and until candidates complete development and receive regulatory approval.
- The filing gives differing cash-runway descriptions: the notes say existing cash is expected to fund operations and capital needs through at least one year after filing; MD&A says cash, IPO proceeds and grant income are expected to fund operations into the second half of 2023. Management cautions that estimates rely on assumptions and funds could be used sooner.
- Additional funding will be needed beyond the projected runway. Potential sources include grants, equity or debt financing, collaborations, strategic alliances and licensing; funding may be unavailable or dilutive or require concessions.
- Clinical execution and financing risks include dependence on CT1812, trial enrollment and timing, COVID-19-related disruption, third-party manufacturing and research providers, grant availability and audits, and volatile capital markets. The filing also identifies geopolitical and economic uncertainty as potential risks.
- The company had approximately $168.9 million in cumulative grant awards, primarily from the NIA; grant periods extend through May 31, 2025, subject to extension. A stated approximately $81 million NIA grant supports the Phase 2 COG0203 study.
- Lease accounting standard adoption on January 1, 2022 added right-of-use assets and lease liabilities; management reported no material effect on operations or cash flows. No material-loss litigation contingency was reported, and the company disclosed no material changes to previously reported risk factors.
- Management said disclosure controls were effective. It implemented a new ERP system during the quarter and modified related control processes; it reported no other control changes that materially affected, or were reasonably likely to materially affect, internal control over financial reporting.
Most important facts for investors to verify
- Progress, enrollment, timing and results of CT1812’s clinical trials, particularly Phase 2 activity and the COG0203 study.
- Grant reimbursement eligibility, collection of receivables, remaining award capacity and any extensions or new NIA funding.
- Cash burn and the assumptions underlying the filing’s differing runway estimates; timing and terms of any future financing.
- Trial continuity and data integrity amid COVID-19 or other disruptions, and the reliability of external manufacturers and research vendors.
- Execution of the new ERP-related controls and the potential effect of ongoing stock-based compensation and equity issuance on dilution.