CytomX Therapeutics, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. CytomX is a clinical-stage oncology company developing Probody-based therapeutics; it has no approved products and generates revenue primarily from collaboration and license agreements.
Financial performance and position
| Metric | Q2 2019 | Q2 2018 | Six months 2019 | Six months 2018 |
|---|---|---|---|---|
| Revenue | $9.0 million | $21.3 million | $38.5 million | $35.5 million |
| Research and development expense | $30.8 million | $25.6 million | $67.2 million | $48.0 million |
| General and administrative expense | $9.4 million | $9.0 million | $19.1 million | $16.4 million |
| Operating loss | $31.2 million | $13.3 million | $47.8 million | $28.9 million |
| Net loss | $29.0 million | $13.4 million | $43.1 million | $28.9 million |
| Basic and diluted loss per share | $0.64 | $0.35 | $0.95 | $0.75 |
- Cash, cash equivalents and short-term investments totaled $349.1 million at June 30, 2019, down from $436.1 million at December 31, 2018. Cash and cash equivalents were $149.4 million; short-term investments were $199.8 million.
- Operating cash use was $87.7 million for the six months, versus $41.2 million in the comparable 2018 period. Investing activities used $11.7 million and financing provided $1.2 million. Cash, cash equivalents and restricted cash declined $98.2 million.
- Total liabilities were $303.8 million, including $249.5 million in deferred revenue and $29.0 million in operating lease liabilities. The filing reports no borrowings or other financial debt.
- The company reported an accumulated deficit of $358.1 million. Product gross margin is not meaningful because there are no product sales; the filing does not report a gross margin.
Material changes and unusual items
- Q2 revenue declined $12.3 million year over year, primarily because Q2 2018 included $9.9 million of revenue recognized from an AbbVie CD71 milestone. First-half revenue rose $3.0 million, largely due to $17.4 million of accelerated BMS revenue recognition after termination of work on two targets in Q1 2019.
- BMS revenue was $32.9 million in the first half, compared with $16.4 million a year earlier. AbbVie revenue was $4.3 million, down from $13.4 million. The $10.0 million AbbVie milestone for selecting a second discovery target was added to deferred revenue and was due from AbbVie at quarter-end.
- First-half R&D expense increased $19.2 million. Significant items included a $5.0 million technology know-how acquisition, $3.4 million of costs associated with the UCSB license amendment, and increased personnel and clinical-trial spending. The UCSB amendment also requires annual maintenance fees of $750,000 through 2031.
- Effective January 1, 2019, lease accounting adoption added a right-of-use asset and lease liabilities to the balance sheet; management said it had no material effect on results or cash flows.
Outlook, commentary and risks
- Management expects existing capital resources to fund operations into 2021, but says additional funds will be needed in the future. It warns that spending plans may need to be reduced if operating results or financing are not achieved.
- Management expects significant losses to continue and R&D spending to rise as clinical programs advance. No product-sales revenue is expected in the foreseeable future.
- Clinical programs include CytomX’s CX-072 and CX-2009, AbbVie-partnered CX-2029, and BMS’s BMS-986249. Clinical outcomes, trial timing and enrollment remain uncertain. Reported CX-2009 risks include ocular toxicity; CX-072 had reported anti-drug antibody rates of approximately 62% at the 10 mg/kg dose and 77% across dose levels at the stated data cutoff.
- The company depends on collaborators and third-party manufacturers. Transfer of CX-2009 manufacturing after ImmunoGen closed its facility remained ongoing; supply interruption or manufacturing scale-up problems could delay development.
- Other major risks include regulatory approval and safety uncertainty, competition, reliance on collaboration milestone revenue, intellectual-property disputes, and the need for future financing. The company reported no known legal proceedings expected to have a material adverse effect. Management concluded disclosure controls were effective and reported no material change in internal control over financial reporting.
Important facts for investors to verify
- Whether the cash runway estimate into 2021 remains supportable as clinical-trial spending rises, and when additional financing may be required.
- Clinical-trial updates for CX-072, CX-2009, CX-2029 and BMS-986249, especially safety, efficacy, enrollment and timing.
- Progress and reliability of CX-2009 manufacturing transfer and the supply chains for all clinical candidates.
- Future collaboration activity, milestone eligibility and revenue recognition, particularly after BMS target discontinuations and AbbVie’s second-target selection.
- The continuing cost and obligations under the UCSB amendment, including annual fees through 2031 and potential amounts due upon early termination.