Compugen Ltd. — FY2021 Form 20-F
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter filing. Figures are in U.S. dollars unless noted.
Business context
Compugen is an Israel-based, clinical-stage immuno-oncology company using computational discovery to identify drug targets and develop antibody candidates. It has no products approved for sale and relies on collaborations and licensing for potential milestone, royalty and other revenue. Its four clinical-stage programs are COM701, COM902, bapotulimab (partnered with Bayer) and AZD2936 (developed by AstraZeneca).
Financial highlights
| Metric | FY2021 | FY2020 |
|---|---|---|
| Revenue | $6.0 million | $2.0 million |
| Cost of revenue | $0.68 million | $0.06 million |
| Gross profit | $5.32 million | $1.94 million |
| Research and development expense, net | $28.69 million | $22.76 million |
| Total operating expenses | $40.39 million | $33.44 million |
| Operating loss | $35.07 million | $31.50 million |
| Net loss | $34.20 million | $29.70 million |
| Net loss per share | $0.41 | $0.37 |
| Net cash used in operating activities | $22.75 million | $28.32 million |
| Cash, cash equivalents and short-term bank deposits | $117.0 million | $123.8 million |
FY2021 revenue was the $6.0 million AstraZeneca clinical milestone; the company reported that one collaborator accounted for all revenue in both 2021 and 2020. Financial and other income was $0.87 million, down from $1.80 million. Accumulated deficit was $422.1 million. The filing reports no debt balance; lease liabilities totaled $2.75 million at year-end, including $0.77 million current. Operating lease obligations were $3.05 million in total.
Changes versus FY2020
- Revenue rose by $4.0 million, entirely reflecting the AstraZeneca milestone; it is collaboration-dependent rather than evidence of product sales.
- R&D expense increased 26%, mainly due to clinical studies, preclinical and CMC work, and increased clinical-team headcount. Total operating expenses rose about 21%.
- Net loss widened by $4.5 million, while operating cash use fell by $5.6 million. Management attributed lower cash use chiefly to AstraZeneca milestone receipts and Bristol Myers Squibb (BMS) participation in R&D costs, partly offset by higher operating expenses.
- Liquidity declined by $6.8 million. Financing cash inflow was $16.8 million, primarily from BMS’s $20 million investment and equity-award exercises; the company issued 2.33 million shares to BMS at $8.57333 per share.
Outlook, clinical programs and risks
- Management expects existing cash, cash equivalents and short-term deposits to fund operations into 2024 at the current annual expenditure level; this estimate excludes significant increases in spending and depends on future cash needs and funding availability.
- For 2022, management expected R&D to represent about 80% of operating expenses and to increase approximately 55% from 2021, reflecting planned clinical-trial expansion.
- COM701 combination trials reported preliminary safety and antitumor activity signals. In the triple-combination dose-escalation study, 13 patients had no dose-limiting toxicities reported as of the stated cutoff; best responses included stable disease in three patients. COM902 dose escalation reported stable disease as the best response in nine of 18 patients. These are early, limited data and may change; they do not establish efficacy or predict approval.
- Key risks include continued losses, uncertain collaboration revenue and possible need for additional capital; clinical, regulatory, enrollment and manufacturing setbacks; dependence on collaborators and third-party suppliers; intense competition, particularly in TIGIT and PVRIG; and the possibility that candidates fail or cannot be commercialized.
- Other material exposures include NIS/U.S. dollar movements and Israeli inflation, geopolitical and operational risks in Israel, data privacy and cybersecurity, and patent challenges. Two parties sought revocation of Compugen’s European anti-PVRIG patent; the company reported that it was awaiting the EPO’s decision.
- The company reported no material pending legal proceedings. Its financial statements received an unqualified audit opinion, and management and the auditor concluded internal control over financial reporting was effective as of December 31, 2021.
Important facts for investors to verify
- Whether cash burn and clinical expansion remain consistent with management’s stated runway into 2024, particularly given the planned 2022 R&D increase.
- Progress, enrollment, safety and final results for COM701 and COM902 trials; distinguish preliminary response measures from confirmed clinical benefit.
- Whether AstraZeneca, Bayer or other partners generate further milestones, royalties or development activity; FY2021 revenue came from a single milestone and one collaborator.
- Current cash and deposit balances, financing needs, potential dilution, and the timing and terms of any future capital raise.
- Outcome of the European anti-PVRIG patent opposition and the practical scope and durability of relevant patent protection.
- Exposure to Israeli-currency and geopolitical risks, as well as any changes in manufacturing, trial execution or collaboration arrangements.