COMPASS Pathways plc — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. COMPASS is a clinical-stage mental health company developing COMP360 psilocybin therapy, primarily for treatment-resistant depression (TRD). It has no approved products and generated no revenue.
Financial results and liquidity
| Metric | Q1 2022 | Q1 2021 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $15.4 million | $6.9 million; up $8.5 million |
| General and administrative expense | $10.1 million | $6.7 million; up $3.3 million |
| Total operating expenses | $25.4 million | $13.6 million; up $11.8 million |
| Net loss | $21.2 million | $12.7 million |
| Net loss per share, basic and diluted | $0.50 | $0.35 |
| Operating cash used | $23.1 million | $13.8 million |
| Cash and cash equivalents at period end | $243.7 million | $273.2 million at Dec. 31, 2021 |
R&D expense growth reflected higher clinical-trial, drug-development, manufacturing and preclinical costs, as well as increased staffing and share-based compensation. G&A growth primarily reflected increased personnel, professional fees and operating costs. The company reported a $2.9 million UK R&D tax-credit benefit and a $1.3 million foreign-exchange gain in Q1 2022.
Total assets were $272.1 million and total liabilities were $12.5 million at March 31, 2022. Current assets were $266.6 million and current liabilities were $11.7 million. The filing reports operating-lease liabilities but no borrowings or other debt. Cash, cash equivalents and restricted cash totaled $243.8 million; the quarter’s $29.6 million decline included a $6.5 million adverse exchange-rate effect. Foreign-currency translation also reduced other comprehensive income by $7.2 million. Profitability and operating margins are not meaningful measures for this pre-revenue company.
Material changes and business developments
- Net loss increased by $8.5 million year over year as operating expenses rose substantially, especially R&D spending.
- Management reported positive topline results announced in November 2021 from its 233-participant Phase IIb TRD trial: the 25 mg dose met the primary endpoint versus the 1 mg arm at three weeks (p<0.001). This is prior-period trial news, not a Q1 2022 result.
- The company said it anticipated starting a Phase III TRD program in the second half of 2022.
- A 20-participant, open-label Phase II study of COMP360 in PTSD was planned to assess safety and tolerability.
- In March 2022, COMPASS announced a strategic partnership with South London and Maudsley NHS Foundation Trust and King’s College London to establish the Centre for Mental Health Research and Innovation.
- Ordinary shares outstanding were 42.5 million at March 31, 2022, compared with 42.0 million at year-end 2021.
Outlook, risks and contingencies
Management estimated that the $243.7 million cash balance would fund operating expenses and capital requirements into 2024, while cautioning that this estimate depends on assumptions and cash could be depleted sooner. The company expects losses and R&D and G&A expenses to continue increasing, and stated that it will need substantial additional funding. Its $150 million at-the-market share-sale facility had not been used as of the filing.
- Key risks include clinical-trial failure or delay, patient enrollment and safety, regulatory approval, and the need for DEA and other controlled-substance approvals and scheduling. Psilocybin and psilocin are Schedule I substances in the United States.
- The company relies on third-party manufacturers, clinical sites, contract research organizations and therapists; supply, compliance, capacity or staffing issues could delay development or commercialization.
- COVID-19 had previously delayed Phase IIb enrollment; further disruption to trials, suppliers or sites remained possible. Management also cited inflation, interest rates, geopolitical conditions and foreign-exchange volatility as potential pressures on costs, capital access and operations.
- Commercialization depends on acceptance by patients and providers, trained therapists and suitable treatment sites, manufacturing scale-up, pricing and reimbursement, and controlled-substance compliance.
- No material litigation or contingency reserves were reported as of March 31, 2022. A new five-year Denmark Hill lease was expected to commence in May 2022 at annual rent of £180,000.
- Management stated disclosure controls were effective at quarter-end and that no material changes in internal control occurred during the quarter. Previously identified material weaknesses were reported as remediated, though the filing notes that future deficiencies remain possible.
Important facts for investors to verify
- Whether the Phase III TRD program began on the anticipated timetable, and what its design, enrollment and cost are.
- Final and fuller Phase IIb data, including durability, safety and the clinical significance of outcomes beyond the topline announcement.
- Progress, enrollment and safety updates for the PTSD study and any other COMP360 trials.
- Actual cash burn and the assumptions behind management’s runway estimate into 2024; timing and terms of any additional financing.
- Eligibility and collection of UK R&D tax credits, including the potential effects of the SME program’s qualification and claim limits.
- Regulatory requirements for controlled-substance scheduling, manufacturing and potential commercial use, as well as third-party supply and therapist/site capacity.