CytomX Therapeutics, Inc. — Q1 2016 Form 10-Q
Reporting period: Three months ended March 31, 2016. Unaudited results; comparative period is Q1 2015. CytomX is a preclinical-stage oncology biopharmaceutical company developing Probody therapeutics. It had no product candidates in clinical trials and no product sales.
Financial results
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Total revenue | $2.223 million | $1.742 million |
| Research and development expense | $13.365 million | $4.664 million |
| General and administrative expense | $5.040 million | $1.946 million |
| Operating loss | $16.182 million | $4.868 million |
| Net loss | $16.029 million | $6.211 million |
| Net loss per share, basic and diluted | $0.44 | $7.67 |
| Net cash used in operating activities | $5.540 million | $5.369 million |
Revenue consisted primarily of collaboration payments and research-service reimbursements; the filing reports no product revenue or gross-margin measure. Q1 2016 revenue rose $481,000, attributed to recognized revenue from BMS’s target-selection milestone and increased BMS and Pfizer service revenue. R&D expense rose $8.701 million, principally from laboratory and professional services, stock-based compensation, personnel, and royalty expense. G&A expense rose $3.094 million, reflecting public-company professional costs, stock-based compensation, and higher headcount.
Financial position and liquidity
- At March 31, 2016, cash and cash equivalents were $67.897 million and short-term investments were $112.739 million, totaling $180.636 million, versus $186.711 million at December 31, 2015.
- Current assets were $184.548 million; current liabilities were $17.003 million. Total assets were $191.952 million and total liabilities were $79.238 million.
- Accumulated deficit was $133.495 million. Stockholders’ equity was $112.714 million.
- Operating cash use was $5.540 million. Investing activities provided $13.579 million, primarily from net maturities of short-term investments; financing activities provided $36,000. Cash and cash equivalents increased $8.075 million during the quarter.
- The company reported no outstanding long-term debt; its debt facility had been repaid and terminated in September 2015. Deferred revenue totaled $69.032 million, including current and long-term portions.
Changes, outlook, and material developments
- Management said available cash, cash equivalents, and short-term investments were expected to fund planned operations through the end of 2018, while noting that spending may need to be reduced if anticipated results are not achieved and that additional funding will be needed in the future.
- Management planned to start a Phase 1 trial of CX-072 in 2016 and a Phase 1 trial of CX-2009 in 2017, subject to trial design, regulatory filings, and approvals. Both remained preclinical at the reporting date.
- In January 2016, BMS selected an additional target and paid a $10 million milestone, recorded as deferred revenue and to be recognized over the remaining performance period.
- After quarter-end, on April 21, 2016, CytomX entered two AbbVie agreements. The co-development agreement included a $20 million upfront payment and up to $470 million in development, regulatory, and commercial milestones, subject to terms including potential reductions if CytomX opts out of co-development. The separate discovery agreement included a $10 million upfront payment, a payment upon selection of a second target, and potential further milestones and royalties. These were subsequent events, not Q1 revenue.
- The company entered a new 10-year lease for approximately 76,173 square feet, with commencement expected no earlier than October 1, 2016. It terminated its existing lease effective November 30, 2016 without a termination payment. Disclosed minimum lease payments totaled $47.464 million.
Risks and contingencies
- The company had recurring losses, no approved products, and no human clinical data for its candidates. Development, regulatory approval, manufacturing, and commercial success are uncertain; management expected losses to continue.
- Cash needs and runway depend on development progress, trial costs, collaboration activity, and milestone timing. Additional financing may not be available on acceptable terms and could dilute stockholders.
- CytomX depends on collaborators, contract manufacturers, and other third parties. Collaboration termination or underperformance, supply interruptions, clinical delays, or failure of its novel Probody approach could adversely affect development and funding.
- Revenue and receivables were concentrated: two customers accounted for 80% and 20% of Q1 revenue, respectively. The filing identifies them as Customer A and Customer B; Pfizer revenue is separately identified as related-party revenue.
- The company reported no material litigation and no material impact from the MD Anderson collaboration in the quarter. It disclosed ordinary-course claims and indemnification obligations whose maximum potential payments were not determinable.
- Management concluded disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2016; it reported no material change in internal control over financial reporting during the quarter.
Most important facts to verify
- Whether the stated cash runway through year-end 2018 remains achievable given planned clinical development and spending.
- Timing and regulatory readiness of the CX-072 and CX-2009 Phase 1 programs, and whether either has since entered clinical testing.
- Terms, receipt, and accounting treatment of the AbbVie upfront payments and any subsequent milestones, opt-out decisions, or cost-sharing obligations.
- Dependence on a small number of collaboration customers and the status of BMS, Pfizer, and other partner programs.
- Lease commencement, improvement allowance, and future lease cash obligations.