CytomX Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Filed November 5, 2020. CytomX is a clinical-stage oncology biopharmaceutical company developing Probody-based therapeutics; it has no products approved for sale and no product-sale revenue.
Financial performance
Amounts are in millions of dollars, except per-share data. Margins are calculated from reported revenue and operating loss.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $17.8 | $10.7 | $84.0 | $49.2 |
| Research and development | $24.0 | $28.0 | $90.9 | $95.2 |
| General and administrative | $8.6 | $8.5 | $26.9 | $27.5 |
| Operating loss | $(14.9) | $(25.7) | $(33.8) | $(73.5) |
| Net loss | $(14.7) | $(23.7) | $(18.2) | $(66.8) |
| Basic and diluted loss per share | $(0.32) | $(0.52) | $(0.40) | $(1.47) |
- Revenue increased 66% year over year in Q3 and 71% for the nine-month period. Q3 operating loss was about 84% of revenue, versus 240% a year earlier; nine-month operating loss was about 40% of revenue, versus 149% in 2019. Gross margin is not meaningful for this collaboration-revenue model; the filing reports no product sales.
- Revenue is collaboration-based and concentrated in Bristol Myers Squibb (BMS), AbbVie, Amgen and, beginning in 2020, Astellas. Q3 revenue was $7.4 million from BMS, $4.2 million from AbbVie, $4.5 million from Astellas and $1.6 million from Amgen. Nine-month revenue included $35.6 million from AbbVie, $32.2 million from BMS, $9.1 million from Astellas and $7.0 million from Amgen.
- The nine-month 2020 net loss included a $13.9 million income-tax benefit from CARES Act net operating loss carrybacks and a refund of taxes paid for 2018. The company maintains a full valuation allowance against net deferred tax assets.
Financial position, cash flow and liquidity
- At September 30, cash and cash equivalents were $176.8 million and short-term investments were $144.3 million, totaling $321.1 million, compared with $296.1 million at December 31, 2019. Current assets were $340.3 million and current liabilities $102.0 million; working capital was approximately $238.3 million.
- Total liabilities were $327.1 million, including $277.0 million of deferred revenue and $25.6 million of operating lease liabilities. The filing reports no financial borrowings. Deferred revenue represents future performance obligations, not funded debt.
- Operating cash flow was positive $22.7 million for the nine months, compared with cash used of $111.0 million in 2019. The 2020 inflow principally reflected $46.8 million of increased deferred revenue, including Astellas’s $80 million upfront payment and AbbVie’s $40 million milestone, partly offset by revenue recognized. It should not be read as recurring operating profitability.
- Investing activities used $38.2 million, mainly from net purchases of short-term investments and $1.9 million of capital spending. Financing activities provided $3.9 million, primarily from employee option exercises and stock purchases. Cash, cash equivalents and restricted cash ended at $177.7 million, down $11.6 million from year-end.
- Management expected available resources to fund operations for at least 12 months from issuance of the financial statements, while warning that spending plans could need to be reduced if anticipated results or financing are not achieved. The company said it expects to need additional funding in the future. No shares were sold under its $75 million at-the-market program through September 30.
Material changes and management commentary
- Q3 revenue growth primarily reflected AbbVie milestone-related revenue recognition and Astellas collaboration revenue. Nine-month growth also reflected the $40 million AbbVie CD71 dose-escalation milestone earned in March, of which $26.6 million was recognized immediately, and revenue from the new Astellas agreement. Most remaining milestone payments were constrained because achievement was uncertain and outside CytomX’s control.
- R&D expense declined 14% in Q3, primarily because COVID-19 reduced clinical-study activity; nine-month R&D declined 4%. Lower costs were partly offset by increased program and license expenses. Interest income fell substantially as interest rates declined.
- COVID-19 led CytomX to pause new enrollment and site activation in the CX-2009 study in March. The company revised the program and planned to initiate a new Phase 2 study in Q4 2020, evaluating CX-2009 in breast cancer as monotherapy and in combination with CX-072. It also planned Q4 2020 Phase 2 expansion cohorts for AbbVie-partnered CX-2029. These were plans, not reported completions.
- The company terminated the CX-072 combination study with ipilimumab in melanoma in March 2020, citing the changing clinical, competitive and commercial environment, together with the pandemic. CX-904 had advanced to IND-enabling studies, with an IND filing targeted for late 2021; CX-2043 was also being advanced toward a late-2021 IND filing.
- Operations continued at a reduced rate. The pandemic could further disrupt research, enrollment, clinical sites, manufacturing, supply chains and partner programs; the financial impact could not be reasonably estimated. CytomX relies on third parties for clinical trials and manufacturing and has no manufacturing facilities of its own.
Risks, contingencies and other notable items
- The company expects significant losses to continue and has an accumulated deficit of $435.4 million. Clinical success, regulatory approval, commercialization, collaboration decisions and future financing are uncertain; the Probody platform and product candidates remain investigational.
- Reported safety considerations include CX-2009 ocular toxicity and other Grade 3/4 treatment-related events, and dose-dependent hematologic events reported for CX-2029. Further study is needed to establish safety and efficacy.
- Two lawsuits were pending, with no accrual recorded: a patent-infringement action by Vytacera Bio alleging infringement involving basic-research uses of the Probody platform, and a putative securities class action alleging misleading statements related to CX-072 and CX-2009. CytomX said it considers both claims without merit; potential damages are not estimable.
- The company disclosed no material change in contractual obligations during the quarter. It reported effective disclosure controls and no material change in internal control over financial reporting.
Investor facts to verify
- Whether the planned Q4 2020 CX-2009 study and CX-2029 expansion cohorts began on schedule, and how COVID-19 affected enrollment and site activation.
- Upcoming clinical data, particularly the efficacy and safety profiles of CX-2009 and CX-2029, including ocular and hematologic toxicities.
- How much reported revenue and operating cash flow depends on milestone recognition and deferred collaboration payments, and the timing of remaining deferred revenue recognition.
- Whether the stated 12-month liquidity runway remains adequate as clinical spending increases, and whether CytomX uses the ATM program or other financing.
- Developments in the Vytacera patent case and securities class action, and any potential financial or operational consequences.
- The terms and potential impact of the Amgen agreement amendment dated September 29, 2020, filed as an exhibit; the filing narrative does not provide a clear summary of its substantive changes.