Compass Therapeutics, Inc. — Form 10-Q Summary
Business context and reporting period
Compass Therapeutics is a clinical-stage biopharmaceutical company developing antibody therapeutics for solid tumors and hematological malignancies. Its lead candidate, CTX-471, is a monoclonal antibody targeting CD137; CTX-8371 is a bispecific antibody targeting PD-1 and PD-L1. This report covers the three months ended March 31, 2021, and was filed April 30, 2021.
The company has no products approved for commercial sale and has never generated product-sale revenue. It is an emerging growth company, a smaller reporting company, and its common stock trades on the OTCQB under the symbol CMPX.
Financial condition and key metrics
| Metric | Q1 2021 | Q1 2020 or comparison |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.704 million | $3.571 million |
| General and administrative expense | $2.635 million | $2.260 million |
| Total operating expenses | $7.339 million | $5.831 million |
| Loss from operations | $(7.339) million | $(5.831) million |
| Net loss | $(7.422) million | $(6.402) million |
| Basic and diluted loss per share | $(0.14) | $(0.90) |
| Net cash used in operating activities | $(5.605) million | $(7.761) million |
| Cash, cash equivalents and restricted cash at period end | $39.846 million | $17.793 million |
Cash and cash equivalents were $39.695 million at March 31, 2021, down from $47.076 million at December 31, 2020. Total assets were $48.198 million, total liabilities were $14.727 million, and stockholders’ equity was $33.471 million. The company reported an accumulated deficit of $158.830 million.
Debt principal outstanding was $7.500 million, net carrying value $7.474 million. The Pacific Western Bank facility bears interest at 6.25%, matures March 1, 2022, and requires $625,000 monthly principal payments through March 31, 2022. The company made $1.875 million of principal repayments during the quarter and was in compliance with its covenants at March 31, 2021. The facility requires a minimum cash balance of $6.0 million and is secured by substantially all company assets other than intellectual property.
The company adopted lease accounting guidance effective January 1, 2021. This resulted in recognition of a $4.892 million operating lease right-of-use asset and $4.902 million of operating lease liabilities at March 31, 2021.
Material changes versus the prior comparable period
- Research and development expense increased $1.133 million, or approximately 32%, primarily because of increased CTX-8371 manufacturing costs, including approximately $1.0 million incurred under the FUJIFILM Diosynth agreement.
- General and administrative expense increased $375,000, principally due to higher stock-based compensation, partly offset by lower salary and benefits costs from reduced headcount.
- Total operating expenses increased $1.508 million, and net loss increased $1.020 million.
- Other expense improved by $472,000 because Q1 2020 included a $320,000 increase in the fair value of a derivative liability that was settled following the June 2020 merger, while Q1 2021 included a $44,000 gain on equipment disposal.
- Operating cash use decreased $2.156 million, primarily reflecting changes in prepaid expenses, accrued expenses, and other operating liabilities.
- Cash used in financing activities increased because the company made $1.875 million of debt principal repayments in Q1 2021.
- Basic and diluted weighted-average shares increased to 51.313 million from 7.122 million, reflecting the post-merger capital structure and related share issuance activity.
- The company began occupying a new corporate office and laboratory facility in January 2021 under a four-year-and-five-month operating lease.
Clinical progress, outlook, risks, and unusual items
The Phase 1 dose-escalation stage for CTX-471 was completed, and the company reported that the candidate was generally well tolerated. The dose-expansion stage was ongoing; as of April 23, 2021, 14 patients had received at least one dose, 11 had reached their first tumor evaluation, and six had stable disease. One patient with advanced small-cell lung cancer had a confirmed partial response at Week 25. No treatment-related serious adverse events had been reported in the dose-expansion stage as of that date.
Management expected to complete the CTX-471 Phase 1b stage in the first half of 2022 and initiate a Phase 2/3 trial in the second half of 2022. IND-enabling studies for CTX-8371 began in August 2020, with an IND submission targeted for the first half of 2022.
Management stated that available cash was expected to fund operating expenses and capital expenditures into the second quarter of 2022, including completion of the CTX-471 Phase 1 trial and commencement of planned CTX-8371 development. The company expects to require additional funding and may use equity, debt, collaborations, strategic alliances, or licensing arrangements. The filing does not provide a specific amount or timing for that future financing.
COVID-19 caused temporary delays from reduced patient enrollment at some sites and delays in supplies for future clinical-trial manufacturing. Management stated that the ongoing Phase 1 trial had continued without significant overall delays but warned that the pandemic could affect personnel, suppliers, material availability, costs, and trial timelines.
Key contingencies include approximately $2.0 million of potential future milestones under the Adimab collaboration and approximately $2.0 million of future payments under the FUJIFILM work statement. The company recorded no Adimab milestone payments during the quarter. No material legal proceedings or off-balance-sheet arrangements were reported.
Principal risks include the company’s limited operating history, recurring losses, lack of product revenue, need for substantial additional financing, uncertain clinical and regulatory outcomes, manufacturing and supply constraints, intellectual-property challenges, competition, COVID-19 effects, and potential dilution or restrictive terms from future financing.
Facts investors should verify
- Cash runway assumptions and whether the company can fund operations into the second quarter of 2022 as projected.
- Timing and results of the CTX-471 Phase 1b trial, including enrollment, safety, response durability, and the planned Phase 2/3 program.
- Progress toward CTX-8371 IND-enabling studies and the targeted first-half-2022 IND submission.
- Expected future financing needs, potential dilution, and the availability and terms of new capital.
- Debt repayment requirements, minimum cash covenant, and the March 2022 maturity of the remaining $7.5 million principal balance.
- Potential effects of COVID-19 on patient enrollment, clinical-trial timelines, manufacturing supplies, and development costs.
- Future milestone and contractual payments under the Adimab and FUJIFILM agreements.