Filing identity and reporting period
Important identity mismatch: The supplied filing is Cortexyme, Inc. (Nasdaq: CRTX), not Quince Therapeutics, Inc. It is a Form 10-Q for the quarter ended September 30, 2019, filed November 12, 2019. The financial statements are unaudited.
Business context and financial performance
Cortexyme described itself as a clinical-stage biopharmaceutical company developing COR388, an oral gingipain inhibitor being studied for mild-to-moderate Alzheimer’s disease. It reported no product revenue; margins are therefore not meaningful. All dollar amounts below are in millions unless stated otherwise.
| Metric | Q3 2019 | Q3 2018 | Nine months 2019 | Nine months 2018 |
|---|---|---|---|---|
| Revenue | None reported | None reported | None reported | None reported |
| Research and development expense | $8.253 | $2.290 | $20.187 | $6.989 |
| General and administrative expense | $2.316 | $0.584 | $6.032 | $1.288 |
| Net loss | $(9.858) | $(2.521) | $(24.601) | $(9.006) |
| Operating cash used | Not separately stated | Not separately stated | $(22.327) | $(7.722) |
Q3 research and development expense rose 260% year over year, primarily due to COR388 clinical-trial activity and manufacturing costs. Nine-month R&D growth reflected the Phase 2/3 program, including higher clinical-trial and drug-manufacturing costs. G&A increased as headcount and public-company costs, including insurance, legal and accounting fees, rose. Interest income partly offset operating losses; the nine-month 2018 comparison also included interest expense and a derivative fair-value charge that were absent in 2019.
Balance sheet, liquidity and financing
- At September 30, 2019, cash and cash equivalents were $44.740 million, short-term investments $75.730 million, and long-term investments $7.341 million. The filing reports cash, cash equivalents and short-term investments of $120.5 million; including long-term investments, the balance-sheet amounts total approximately $127.8 million.
- Total assets were $133.414 million; current and total liabilities were $6.127 million. The filing reports no debt outstanding at quarter-end.
- Accumulated deficit was $57.426 million. Stockholders’ equity was $127.287 million, versus a stockholders’ deficit of $32.626 million at December 31, 2018.
- Net cash from financing activities was $77.896 million for the first nine months of 2019, principally reflecting $77.827 million of net IPO proceeds. The May 2019 IPO sold 5,073,800 shares at $17 per share and converted all preferred stock into common stock.
- Management said available cash, cash equivalents and short-term investments were expected to fund planned operations for at least 12 months from the filing date. It anticipated continued losses and said additional capital might be needed; if financing is unavailable, it may have to delay or reduce development activity.
Outlook, risks and notable items
- The global Phase 2/3 GAIN trial of COR388 began in April 2019. Management expected top-line results by the end of 2021 and anticipated substantially higher R&D spending as trials and development advanced.
- The company reported COR388 was well tolerated, with no concerning safety signals, in Phase 1a and 1b studies involving 67 subjects, including nine Alzheimer’s patients. These are management-reported findings, not proof of efficacy.
- Management identified uncertainty in clinical outcomes, trial costs and timing, patient enrollment, manufacturing and regulatory requirements. It stated profitability and the resources needed to complete development could not be estimated.
- Disclosure controls and procedures were deemed ineffective because of a previously identified material weakness in financial reporting controls. Remediation was underway, with completion expected during 2019; management cautioned it could not assure timely or successful remediation.
- The filing reported no material legal proceedings, no material changes to previously disclosed risk factors, and no material change in planned IPO-proceeds use. It reported no material off-balance-sheet arrangements.
Investor verification checklist
- Confirm the issuer: this document names Cortexyme, Inc. (CRTX), not Quince Therapeutics, Inc.
- Verify the cash runway and reconcile the reported $120.5 million of cash, cash equivalents and short-term investments with the additional $7.341 million of long-term investments and the filing’s $127.8 million market-risk figure.
- Track GAIN trial enrollment, safety, execution, costs and the stated end-2021 top-line-results target.
- Assess the company’s dependence on future financing given continued operating losses and cash burn.
- Monitor remediation of the material weakness and any subsequent changes in disclosure controls.