Quince Therapeutics, Inc. (then Cortexyme, Inc.) — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. The filing is by Cortexyme, Inc. (Nasdaq: CRTX); it describes a proposed Novosteo merger, after which the company planned to rename itself Quince Therapeutics, Inc. and use ticker QNCX. The merger had not closed as of the filing.
Business context and financial results
Cortexyme was a clinical-stage biopharmaceutical company developing therapies for Alzheimer’s and other conditions. It had no product revenue and had never been profitable.
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $12.8 million | $16.8 million |
| General and administrative expense | $9.1 million | $6.5 million |
| Total operating expenses | $21.9 million | $23.3 million |
| Net loss | $21.6 million | $23.1 million |
| Net loss per share, basic and diluted | $0.72 | $0.78 |
| Net cash used in operating activities | $16.1 million | $13.6 million |
At March 31, 2022, cash and cash equivalents were $67.6 million, short-term investments $24.0 million, and long-term investments $19.2 million, totaling $110.7 million in cash, cash equivalents and investments. Current liabilities were $9.7 million; total liabilities were $9.8 million, principally lease liabilities. Accumulated deficit was $258.2 million. The company reported no material change in contractual obligations.
Material changes and unusual items
- R&D expense fell 24% year over year, mainly as atuzaginstat (COR388) trial, manufacturing and related costs declined. G&A rose 40%, reflecting severance, higher stock-based compensation, insurance and professional fees.
- Stock-based compensation was $9.2 million, compared with $7.0 million a year earlier. Q1 included approximately $1.7 million of severance costs. The company also recorded $150,000 of other income, primarily from foreign exchange gains.
- The FDA placed a full clinical hold on the atuzaginstat (COR388) Alzheimer’s IND in January 2022. The GAIN Phase 2/3 trial had not met its co-primary cognitive and functional endpoints in the overall population. Management prioritized COR588 and was exploring potential non-Alzheimer’s uses for COR388.
- Management cited a planned workforce reduction of approximately 67% in total following additional reductions announced in April. It estimated annualized 2022 savings of approximately $10.1–$10.5 million, excluding stock-based compensation and one-time costs.
- After the quarter, the company agreed to acquire Novosteo, subject to customary closing conditions. It expected to issue approximately 6 million shares, or about 19.99% of fully diluted securities, and planned the corporate name and ticker change.
Outlook, liquidity and risks
Management stated in its liquidity note that cash, cash equivalents and short-term investments of $91.5 million were expected to fund planned operations for at least 12 months from issuance of the financial statements. The MD&A separately stated that existing capital resources, including investments, were expected to fund projected operations through 2024. These are different measures and assumptions; the filing does not reconcile them. Management anticipated continuing operating losses and said further capital may be needed, with development plans, spending and financing availability affecting runway.
Near-term plans included completing the COR588 Phase 1 multiple-ascending-dose portion, then advancing toward Phase 2 subject to results. Management also cited clinical, regulatory, manufacturing, funding, competition, intellectual-property and third-party execution risks. It reported no significant COVID-19 operating or financial impact to date, while warning that future disruption remained uncertain. A 100-basis-point immediate interest-rate change was not expected to materially affect investment fair value. Disclosure controls and procedures were deemed effective as of March 31, 2022; no material legal proceedings were reported.
Most important facts for investors to verify
- The basis and assumptions behind the stated runway through 2024 versus the separate “at least 12 months” liquidity statement, including expected burn after restructuring.
- FDA requirements and any status changes for the COR388 clinical hold, and the complete GAIN trial results and safety data.
- COR588 Phase 1 results and whether the planned Phase 2 study proceeds, on what timeline and with what funding.
- Actual workforce reductions, severance expense and realized savings compared with management estimates.
- Whether the Novosteo merger closes, its final share issuance and dilution, and any resulting name or ticker change.
- Future financing needs and the impact of the $150 million at-the-market sales agreement on shareholder dilution.