Compugen Ltd. — FY2018 Form 20-F
Reporting period: Fiscal year ended December 31, 2018. This is an annual report, not a standalone fourth-quarter filing; the supplied filing text does not provide separate Q4 financial results. Figures are in U.S. dollars unless noted.
Business context
Compugen is an Israel-based clinical-stage immuno-oncology discovery and development company. Its lead internal program, COM701, and Bayer-partnered BAY 1905254 entered Phase 1 trials in 2018. The company has no products approved for sale and depends on collaborations, license payments, milestones, and potential future royalties.
Financial performance and liquidity
| Metric | FY2018 | FY2017 |
|---|---|---|
| Revenue | $17.8 million | $0 |
| Cost of revenue / gross profit | $1.034 million / $16.766 million | $0 / $0 |
| Operating expenses | $39.993 million | $37.405 million |
| Operating loss | $(23.227) million | $(37.405) million |
| Net loss | $(22.599) million; $(0.41) per share | $(37.066) million; $(0.72) per share |
| Net cash used in operating activities | $(13.291) million | $(30.658) million |
| Cash, cash equivalents, restricted cash and short-term deposits | $45.675 million | $30.438 million |
| Total assets / shareholders’ equity | $53.180 million / $37.243 million | $38.746 million / $29.297 million |
Revenue included a $10 million upfront AstraZeneca license payment and a $7.8 million Bayer milestone after the first patient entered the BAY 1905254 Phase 1 trial. These two items accounted for substantially all reported revenue; the filing reports no royalty revenue. Revenue therefore reflects collaboration events rather than recurring product sales. Approximate gross margin was 94%.
Research and development expense was $30.318 million, up 6% from 2017, mainly due to COM701 trial start-up costs. Marketing and business development expense was $1.634 million, and general and administrative expense was $8.041 million. The company reported no funded debt in the summarized balance sheet; current and non-current liabilities were $9.989 million and $5.948 million, respectively. Total operating lease commitments were $6.358 million.
Material changes and financing
- Net loss narrowed from $37.066 million to $22.599 million, while operating expenses increased. The improvement principally reflects the 2018 collaboration revenue.
- Cash used in operations fell to $13.291 million from $30.658 million, partly due to collaboration receipts and $4.092 million of deferred Bristol-Myers Squibb participation in R&D expenses.
- Financing activities provided $28.396 million in 2018. The company received net proceeds of $19.767 million from a registered direct offering, $7.788 million net from Bristol-Myers Squibb’s $12 million share purchase after accounting allocation and issuance costs, and $0.156 million net through its ATM offering. The registered offering also included warrants to purchase approximately 4.25 million shares at $4.74 per share.
- Shares outstanding increased from 51.293 million at year-end 2017 to 59.850 million at year-end 2018.
Outlook, risks and unusual items
- Management expected available cash and short-term deposits, together with planned cost reductions, to fund operations through mid-2020. This was an estimate, not a guarantee, and excluded potential additional financing or collaboration proceeds.
- On February 26, 2019, after year-end, Compugen announced a restructuring: workforce reduction of 35% (about 35 employees), R&D consolidation in Israel, and outsourcing of certain preclinical work. It anticipated annual savings of up to $10 million and approximately 20% lower R&D expenses in 2019 versus 2018. Management said the changes were intended to extend runway and support planned expansion of the COM701 Phase 1 study.
- COM701 was in Phase 1 dose escalation; the filing reported no dose-limiting toxicities in the first three single-subject cohorts and ongoing assessment in the fourth cohort as of the stated update. Trial timing and results depend on enrollment, safety, efficacy, and other factors. COM902 remained preclinical, with an IND submission expected in 2019; BAY 1905254 was being developed in Bayer’s Phase 1 trial.
- Key risks include clinical failure or delay, dependence on collaborators and sole-source manufacturers, uncertain ability to secure future funding or partnerships, competition, intellectual-property challenges, and execution risks from the restructuring. The company had an accumulated deficit of $330.841 million and expected continued losses.
- 2018 revenue was concentrated in two counterparties, identified in the financial statements as 44% and 56% of revenue. The filing reports no material pending legal proceedings. The independent auditor gave an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Whether the restructuring achieved the stated savings and whether the projected mid-2020 cash runway remained adequate as trial costs and enrollment needs evolved.
- Subsequent COM701 safety, enrollment, dose-escalation, and combination-trial updates, along with progress on COM902 and Bayer’s BAY 1905254 program.
- How much future revenue depends on additional upfront fees or milestones, and the timing and conditions for AstraZeneca and Bayer payments and potential royalties.
- The dilution and potential share supply associated with outstanding options and the approximately 4.25 million offering warrants; also reconcile the filing’s different cash-and-deposit figures, which vary according to whether restricted cash is included.
- Whether the Bristol-Myers Squibb deferred R&D participation is recognized over the expected trial period as planned, and whether collaboration terms or trial scope change.