CytomX Therapeutics, Inc. — Q2 2018 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2018; unaudited. CytomX is a clinical-stage oncology biopharmaceutical company developing antibody therapeutics using its Probody platform. It had no approved products and generated no product-sales revenue.
Financial performance and liquidity
- Revenue: Q2 revenue was $21.3 million, versus $8.8 million in Q2 2017; first-half revenue was $35.5 million, versus $20.4 million. Revenue was primarily from collaboration agreements. Q2 included $10.8 million from AbbVie, $8.2 million from BMS and $1.6 million from Amgen.
- Loss: Q2 net loss was $13.4 million ($0.35 per share), compared with $25.2 million ($0.69 per share). First-half net loss was $28.9 million ($0.75 per share), compared with $33.5 million ($0.91 per share). Q2 operating expenses were $34.6 million, including $25.6 million of R&D and $9.0 million of G&A.
- Cash flow: First-half operating cash use was $41.2 million, versus $154.1 million provided in the prior-year period, which included a $200 million BMS collaboration upfront payment. Investing activities used $6.7 million; financing provided $3.3 million.
- Liquidity and balance sheet: At June 30, cash and cash equivalents were $132.9 million and short-term investments were $202.2 million, totaling $335.1 million. Total assets were $376.9 million, total liabilities $335.8 million, and stockholders’ equity $41.1 million. Accumulated deficit was $259.3 million. The filing reports no debt balance. Deferred revenue totaled $301.8 million.
- Subsequent financing: In July, CytomX completed a common-stock offering and received approximately $134.5 million in net proceeds.
Changes versus the prior comparable period
- Reported revenue increased, while net losses narrowed. R&D expense rose $5.4 million in the first half, mainly with clinical-development activity and higher personnel costs; G&A rose $4.7 million, including higher personnel, consulting and patent costs.
- Comparisons are materially affected by adoption of ASC 606 on January 1, 2018. Under ASC 605, Q2 and first-half 2018 revenue would have been $32.4 million and $45.0 million, respectively, rather than reported revenue of $21.3 million and $35.5 million. ASC 606 increased opening deferred revenue and accumulated deficit by $10.9 million; revenue timing changed particularly for the AbbVie CD71 milestone.
- Pfizer terminated its collaboration in March 2018; CytomX recognized the remaining $1.1 million of deferred revenue and had no further performance obligations.
Outlook, commentary and risks
- Management expected existing capital resources to fund operations for at least 12 months and stated that spending and losses were expected to increase substantially in the second half of 2018 as clinical programs advanced. The July offering added financing after quarter-end.
- The company expected initial CX-2009 clinical data in the second half of 2018 and anticipated filing an IND for wholly owned CX-188 in the second half, subject to required conditions. CX-072 and CX-2009 were in Phase 1/2 trials; CX-2029, partnered with AbbVie, began Phase 1/2 enrollment and dosed its first patient in Q2. BMS was evaluating its CTLA-4 program in Phase 1/2.
- Management cited substantial uncertainty in clinical outcomes, trial timing and enrollment, regulatory approval, future financing needs, collaborator decisions, and dependence on third-party manufacturing. CX-2009 supply could be disrupted as manufacturing transferred from ImmunoGen, whose clinical facility was scheduled to close at year-end. CX-2029 relied on three manufacturing parties.
- The filing reported initial CX-072 data announced in June: most treatment-related adverse events were Grade 1/2, but Grade 3/4 events occurred in monotherapy and combination cohorts, including one dose-limiting Grade 3 dyspnea event. Further safety and efficacy results remain uncertain.
- ASC 606 estimates affect reported revenue and losses; the company also noted a full valuation allowance on deferred tax assets and provisional accounting related to the Tax Cuts and Jobs Act. Management reported effective disclosure controls as of June 30. No material legal proceeding was identified.
Important facts for investors to verify
- How reported collaboration revenue and deferred revenue evolve under ASC 606, especially milestone recognition and remaining performance obligations.
- Clinical progress, safety and efficacy data for CX-072, CX-2009 and CX-2029, and whether CX-188’s anticipated IND timing is achieved.
- Cash use and operating runway as clinical spending rises, including the impact of the July offering and future financing needs.
- Whether third-party manufacturing transfers and supply arrangements proceed without disrupting clinical programs.
- Whether collaboration partners continue development and whether contingent milestone payments become achievable; the filing does not treat most potential future milestones as probable at this date.