Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion of the financial condition and results of operations of Compass Therapeutics, Inc. should be read in conjunction with the financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q for the periodthree and six month periods ended SeptemberJune 30, 2022.2023. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk, uncertainties and assumptions. You should read the “Risk Factors” section of this Quarterly Report on Form 10-Q and the “Risk Factors” section included in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage, oncology-focused biopharmaceutical company developing proprietary antibody-based therapeutics to treat multiple human diseases. Our scientific focus is on the relationship between angiogenesis, the immune system, and tumor growth. Our pipeline of novel product candidates is designed to target multiple critical biological pathways required for an effective anti-tumor response. These include modulation of the microvasculature via angiogenesis-targeted agents, induction of a potent immune response via activators on effector cells in the tumor microenvironment, and alleviation of immunosuppressive mechanisms used by tumors to evade immune surveillance. We plan to advance our product candidates through clinical development as both standalone therapies and in combination with proprietary pipeline antibodies based on supportive clinical and nonclinical data.
On June 25, 2021,In January 2023, we consummated a definitive merger agreement (the “Merger Agreement”)redirected our internal research activities from early-stage discovery to translational research and preclinical development support. Our research group is now focused on further and more detailed characterization of our three product candidates, development of additional assays to facilitate regulatory filings, assessment of combinations of our product candidates with TRIGR Therapeutics, Inc. (“TRIGR”), a private biotechnology company. Pursuant to the Merger Agreement, throughother drugs, assessment of additional indications for our wholly-owned subsidiariesproduct candidates and a two-step merger structure, we acquired allvarious pre-clinical studies further expanding our understanding of mechanisms of action, synergistic activities and optimal combinations of the outstanding sharesproduct candidates. We believe that these activities will allow us to focus our resources on our three product candidate programs, unlock the therapeutic potential of TRIGR (the “TRIGR Merger”). Consideration payable to TRIGR shareholders at closing totaled an aggregate of 10,265,133 shares ofthese programs and combinations thereof, and subsequently enhance the return on investment for our common stock (after giving effect to elimination of fractional shares that would otherwise be issued). In addition, TRIGR shareholders are eligible to receive up to $9 million, representing earnout payments which are dependent on certain events.shareholders.
We currently have two product candidates in the clinical stage of development: CTX-009 and CTX-471. In addition, a third product candidate, CTX-8371, is expected to enter the clinic in the second half of 2023. A summary of these product candidates is presented below. We are also developing a portfolio of bispecific and monoclonal antibody product candidates which derive from our in-house antibody discovery and development platforms. For a more detailed description, see our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022.
CTX-009(a.k.a. ABL001) - anti-DLL4 x VEGF-A bispecific antibody
CTX-009 is an investigational bispecific antibody that is designed to simultaneously blocks Delta-like ligand 4/Notch-1 ("DLL4")block DLL4 and vascular endothelial growth factor A ("VEGF-A")VEGF-A signaling pathways, which are critical to angiogenesis and tumor vascularization. Preclinical and early clinical data of CTX-009 as a monotherapy and in combination with chemotherapy suggest that blockade of both pathways provides robust anti-tumor activity across several solid tumors, including colorectal, gastric, cholangiocarcinoma, pancreatic and non-small cell lung cancer.
CTX-009 is undergoing clinical development in patients with advanced solid tumors in the United States, South Korea and China. A Phase 1 dose escalation and dose expansion monotherapy trial in patients with solid tumors and a Phase 1b trial of CTX-009 in combination with chemotherapy were completed in South Korea. In addition, a Phase 2 trial of CTX-009 in combination with chemotherapy in patients with advanced biliary tract cancer is ongoing in South Korea. The first part of the Phase 2 trial has recently been completed and data from that study were presented at ASCO GI in January 2023.
We currently have two open clinical trials in the United States: a Phase 2 trial of CTX-009 in patients with advanced colorectal cancer (“CRC”) and a Phase 2/3 trial of CTX-009 in combination with paclitaxel in patients with advanced biliary tract cancer (“BTC”).
We have licensed exclusive global rights to CTX-009, outside of South Korea, from ABL Bio, Inc. (“ABL Bio”), a South Korea-based clinical-stage company focused on developing antibody therapeutics. South Korean rights are held by Handok Pharmaceuticals, Inc. (“Handok”) and China rights were out-licensed from the Company to Elpiscience Biopharmaceuticals Co., Limited (“Elpiscience”).
CTX-009 is undergoing clinical development in patients with advanced solid tumors. A Phase 1 dose escalation and dose expansion monotherapy study and a Phase 1b combination study of CTX-009 in combination with chemotherapy have been completed. In the first quarter of 2021, Handok commenced a Phase 2 study of CTX-009 in combination with paclitaxel in patients with biliary tract cancers (“BTC” or “cholangiocarcinoma”) in South Korea. The study enrolled patients with unresectable advanced, metastatic, or relapsed BTC who have received one or two prior systemic therapies. This Phase 2 study has a Simon 2 stage adaptive design. In the first stage of the study, three partial responses (“PRs”) need to be observed among the patients dosed in order for the study to advance to the second stage. As of April 14, 2022, the first stage was fully enrolled, and there were ten PRs observed among the 24 patients enrolled and dosed, and therefore, the criteria to advance the study to its second stage was met. The study is being conducted at four leading medical centers in South Korea and as of September 30, 2022, is still ongoing.
We submitted an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (“FDA”) in December 2021 to initiate a global Phase 2 study in the U.S. and South Korea. The FDA cleared our IND application in January 2022.
Phase 2a: Interim Data from Combination Clinical Trial of CTX-009 in BTC in South Korea
Preliminary Activity Data Summary
As of April 14, 2022, the first stage of the study has been fully enrolled, and all 24 patients have been dosed. Of the 24 patients, there were 10 PRs, 9 of which have been confirmed by RECIST 1.1 and one PR pending confirmation, leading to a preliminary overall response rate ("ORR") of 42%. Two patients are not evaluable for response, and 22 of the 24 patients have had stable disease or better with a decline in tumor burden observed in all 22 evaluable patients leading to a clinical benefit rate ("CBR") of 92%. The median time on study as of April 14, 2022 was approximately 6 months.
The interim waterfall plot below depicts the best response for 22 of the 24 patients in the study as of April 14, 2022 (two patients did not reach their week 8 scan):
The swimmer plot below depicts the duration that each patient has been on treatment as of April 14, 2022:
Days on Study
Preliminary Safety Data Summary
As of April 14, 2022, no formal safety data analysis has been completed, but CTX-009 in combination with paclitaxel was observed to be generally well-tolerated and the safety data are consistent with the Phase 1 studies with hypertension and neutropenia being the most common events related to CTX-009 and paclitaxel, respectively.
Of the 24 subjects enrolled in the study, all subjects had at least one Adverse Event (“AE”) related to CTX-009 and/or paclitaxel. The most common AEs (all Grades) occurring in at least 3 patients were anemia (n=3, 12.5%), asthenia (n=6, 25.0%), fatigue (n=4, 16.7%), edema (n=4, 16.7%), pyrexia (n=4, 16.7%), neutropenia (n=13, 54.2%), thrombocytopenia (n=5, 20.8%), headache (n=4, 16.7%), proteinuria (n=5, 20.8%), dysphonia (n=3, 12.5%), dyspnea (n=6, 25%), epistaxis (n=8, 33.3%), pulmonary hypertension (n=4, 16.7%, all Grade 1) and hypertension (n=12, 50.0%).
Grade 3 or greater AEs that were determined to be probably or possibly related to CTX-009 treatment included neutropenia (n=12; 50%), hypertension (n=4; 17%), anemia (n=3; 12.5%) and thrombocytopenia (n=2; 8%), which were attributed to the concomitant chemotherapy agent (paclitaxel) with the exception of hypertension which was attributed to CTX-009. In addition, there were additional Grade 3 or greater events observed in no more than one patient: intestinal perforation, asthenia, catheter site hemorrhage, fatigue, cholangitis, abdominal infection, bacterial gastritis, pneumonia (which was fatal), post-procedure hemorrhage, decreased appetite, cerebral hemorrhage, proteinuria and embolism.
PROGRAM UPDATE – CTX-009
Following initial conversations with the FDA and considering the data from our BTC Phase 2 study, we submitted a protocol to the FDA for a randomized Phase 2/3 study in the United States in adult patients with unresectable, advanced, metastatic or recurrent biliary tract cancers who have received one prior systemic chemotherapy regimen. The study is designed to assess the safety and efficacy of the combination of CTX-009 and paclitaxel versus paclitaxel alone. A schema of the study design is provided below.
The study will enroll 120 patients which will be randomized in a 2:1 ratio to receive CTX-009 plus paclitaxel (n=80) or paclitaxel alone (n=40). The primary endpoint of the study is overall response rate (“ORR”). The study can be found on clinicaltrials.gov.
In September 2022, we received additional feedback from the FDA to our study protocol. Depending on the study’s results, this study could serve as a registrational study to support BLA submission.
Additionally, we are in the process of initiating a Phase 2 study for CTX-009 in patients with advanced metastatic colorectal cancer. This study will assess the safety and efficacy of CTX-009 as a monotherapy in the third and fourth line of treatment. The study can be found on clinicaltrials.gov.
Development Strategy for CTX-009
Our development strategy is to develop CTX-009 in all of the indications in which patients have a need for effective and novel therapeutic agents and data supports the potential therapeutic benefit of CTX-009.
We chose BTC and CRC as our lead indicationindications based on a number of factors, including CTX-009 activity observed in the Phase 1, 1b and Phase 2 studies,clinical trials, lack of effective therapies for thisthese patient populationpopulations in the targeted lines of therapy and the potential for a straight-forward regulatory route to approval. Our Phase 2/3 study
We submitted an Investigational New Drug (“IND”) application to the U.S. Food and Drug Administration (the “FDA”) in December 2021 for CTX-009 and the FDA cleared our IND application in combination with paclitaxel is targeting the second line BTC patient population, including all four anatomical subtypesJanuary 2022. All of the disease. In the United States, thereour CTX-009 trials are over 18,000 BTC patients diagnosed each year. The only therapies launched in the last two decades for the second and third line BTC patients are targeted therapies (FGFR2 inhibitors, IDH1 inhibitors and MSI-high tumors) that may address less than 15% of this patient population combined.
The second indication we are pursuing for CTX-009 is advanced colorectal cancer. There are over 150,000 colorectal cancer patients diagnosedbeing conducted in the United States each year, and approximately one third (~ 50,000 patients) progress to the third line of treatment. The therapies available in the third line (trifluridine/tipiracil; regorafenib) have each demonstrated less than 2% overall response rate with limited efficacy. Moreover, targeted therapies recently approved or in development, such as the small molecule KRAS G12C inhibitors, sotorasib and adagrasib,under this IND.
We are only targeting 1-3% of the colorectal cancer patients. Accordingly, we are initiatingconducting a Phase 2 monotherapy clinical trial of CTX-009 in patients with metastatic colorectal cancer who have received two or three prior systemic therapies irrespective of their KRAS mutation status. The trial is designed to assess the safety and efficacy of CTX-009 as a monotherapy in patients with colorectal cancer treated in the third and fourth linefourth-line settings and utilizes a Simon Two-Stage adaptive design where the criteria to advance to the second stage of the trial is three confirmed partial responses observed in 37 patients enrolled in Stage 1 of the trial. Based on the Simon Two-Stage design, when the criteria for the first stage are met, the trial progresses to the second stage, at which time 47 additional patients will be enrolled. We expect the first interim data readout from the trial in the second half of 2023. The trial can be found on www.clinicaltrials.gov (identifier NCT 05513742).
In addition, we are conducting a randomized Phase 2/3 trial for CTX-009 in combination with paclitaxel in adult patients with unresectable, advanced, metastatic or recurrent biliary tract cancers (“BTC” or “cholangiocarcinoma”) who have received one prior systemic chemotherapy regimen. The trial is designed to assess the safety and efficacy of the combination of CTX-009 and paclitaxel versus paclitaxel alone in patients with advanced colorectal cancer with ORR astreated in the second-line settings. The trial is designed to enroll 150 patients, who will be randomized in a 2:1 ratio to receive CTX-009 plus paclitaxel (n=100) or paclitaxel alone (n=50). The primary endpoint of the trial is overall response rate (“ORR”) and the secondary endpoints include progression free survival (“PFS”), disease control rate (“DCR”), duration of response (“DOR”) and overall survival (“OS”).
In the first half of this year we opened 20 clinical sites and started enrolling patients in this study. Top line data from this study is expected in the second half of 2024. The trial can be found on www.clinicaltrials.gov (Identifier NCT 05506943).
DEVELOPMENT PLANS FOR CTX-009
We intend to explore the potential of CTX-009 in additional indications, based on preclinicaldata from pre-clinical models, potential biomarkers such as DLL4, and clinical data from CTX-009 studies. These studies combined suggest thetrials providing signs of potential activity of CTX-009 in additional indications such as a therapy forovarian cancer, liver cancer, gastric cancer, ovarian cancer, pancreatic cancer, and renal cell cancer. cancer, neuroendocrine cancer and others.
In addition, we are developing a plan to study the combination of CTX-009 with our novel bispecific checkpoint blocker, CTX-8371, orand with other checkpoint blockers, such as pembrolizumab and nivolumab.atezolizumab. Additionally, we plan to studyare considering the combination of CTX-009 with our novel CD137 agonistic antibody, CTX-471.
The timing of the initiation of ourCTX-471, which is currently in a Phase 1b clinical trialstrial in the United States depends, among other things, on the availability of clinical drug product for the studies, communicationspatients with the FDA, FDA allowance for each of the proposed studies to proceed and the availability of cash resources to support such trials. advanced solid tumors.
CTX-471 - a monoclonal antibody agonist of CD137
CTX-471, our monoclonal antibody product candidate, is a fully human, IgG4 monoclonal antibody that is an agonist of CD137, a key co-stimulatory receptor on immune cells. Binding of CTX-471 to CD137 has been observed to lead to ligand-stimulated activation of T-cells and NK cells. In tumor models, treatment with CTX-471 as a monotherapy led to recruitment and activation of immune cells in the tumor microenvironment. In the treated mice, dosing with CTX-471 led to extensive reprogramming of the tumor microenvironment, including increased recruitment of immune cells, reversion of exhausted cytotoxic CD8+ T-cells, reductions in immunosuppressive regulatory T-cells and reductions in immunosuppressive tumor- associatedtumor-associated macrophages. Long after the completion of the treatment with CTX-471, a period described as eight half-lives of the antibody, treated mice exhibited immune memory that prevented reestablishmentre-establishment of the same tumor.
In July 2019, we initiatedThe CD137 antigenic site recognized by CTX-471 does not block the binding of CD137 ligand and is differentiated from the site recognized by CD137 antibodies from competitors. We designed the antibody using different backbones and chose to use a Phase 1 trial evaluatinghuman IgG4 backbone for CTX-471 to enable engagement of Fc receptors FcgRI and FcgRIIb to facilitate CD137 cross-linking while avoiding binding to FcgRIIIa and depletion of immune effector cells through ADCC.
Immune cell depletion experiments showed that the safety and tolerabilityactivity of CTX-471 asrequired the presence of CD4+ T-cells, CD8+ T-cells, and NK cells, indicating a monotherapycoordinated involvement of both innate and adaptive immune cells. Encouragingly, treatment of tumors in oncology patients who were previouslymice with CTX-471 led to a marked reprogramming of the immune component of the tumor microenvironment. We also observed that tumors treated with PD-1 or PD-L1 immune checkpoint inhibitors and subsequently relapsed or progressed after a periodCTX-471 had an approximate two-fold reduction in the number of stable disease. The design of this trial includes a dose escalation stage (Phase 1a) followed by a dose expansion stage (Phase 1b). The Phase 1a dose-escalation stage of the trial has been completed and CTX-471 was observed to be generally well-tolerated.immunosuppressive tumor-associated macrophages.
The dose expansion stage of the trial is currently ongoing and nearing completion. As of September 30, 2022, 60 patients with 18 different cancersIn addition, we have been enrolledobserved potent activity in other syngeneic tumor models including tumor eradication in the studyA20 model of lymphoma, the MC38 model of colon carcinoma and 50 of those patients are evaluable. There are six patients remaining on the study. Four patients had a PR; three of the four have been confirmed by RECIST 1.1 and the fourth PR is unconfirmed and will remain unconfirmed. In addition, 27 patients have reached stable disease, leading to a preliminary ORR of 8% and a CBR of 62%. There have been two treatment-related serious adverse events (“SAE”) in the Phase 1b dose expansion stageEMT6 model of the trial. One event was identical to the dose-limiting toxicity seen in the Phase 1a study (thrombocytopenia with elevated liver function tests and elevated C-reactive protein) and the second SAE was an event of pneumonitis. Both events resolved.breast cancer.
PROGRAM UPDATE –We believe that the ability of CTX-471 to transform the tumor microenvironment through the combined action of immune cell recruitment, alleviation of T-cell exhaustion, suppression of Tregs, and reduction of tumor suppressing macrophages leads to CTX-471’s antitumor activity in mouse models.
OnIn October 11, 2022, we announced a clinical trial collaboration and supply agreement with Merck & Co. (“Merck”), known as MSD outside the United States and Canada) to evaluate CTX-471 in combination with KEYTRUDA® (pembrolizumab). Under the agreement, we areCompass is the study sponsor and Merck will provideprovides the clinical supply of KEYTRUDA and together,KEYTRUDA®. Additionally, we will formformed a Joint Development Committeejoint development committee (“JDC”) with Merck to review the results of this clinical trial results. trial.
In November 2022, we began screening patients for thisannounced the first patient was dosed in the combination arm of the Phase 1b study to include CTX-471 combined1 trial. This combination arm is enrolling patients with KEYTRUDA in patients whometastatic or locally advanced non-small cell lung cancer, melanoma, small cell lung cancer, mesothelioma and head and neck cancer that have progressed following initial response toafter treatment with a PD-1 regimen.or PD-L1 checkpoint inhibitor. Patients enrolled in the trial will be treated with CTX-471 in combination with pembrolizumab with the goal of restoring response.
In July 2023, enrollment in the dose escalation portion of the study was completed. We expect the first interim data from the trial in the second half of 2023.
CTX-8371 - a bispecific antibody that simultaneously targets both PD-1 and PD-L1
CTX-8371 is a bispecific antibody that binds to both PD-1 and PD-L1, the targets of well-known and widely used checkpoint inhibitor antibodies.antibodies and in addition acts via differentiated mechanism-of-action that involves cleavage of cell surface PD-1. Preclinical studies demonstrate that CTX-8371 has the ability to outperform PD-1, PD-L1, and combinations of the two to activate T-cells in in vitro assays. In mouse xenografts, treatment with CTX-8371 led to significantly greater tumor growth control and longer survival than treatment with a PD-1 inhibitor alone, a PD-L1 inhibitor alone or the combination of PD-1 and PD-L1 inhibitors.
We completed our first GMP manufacturing campaign for CTX-8371 in the second quarter of 2022. IND-enabling studies withon CTX-8371, were initiated in August 2020 andincluding GLP toxicology studies in non-human primates are ongoing. Our contract development manufacturing organization, Fujifilm Diosynth Biotechnologies (see Note 10 to the financial statements contained in this Form 10-Q for further description of Fujifilm agreement) experienced delays with its supply chain management, leading to a delay in the good manufacturing practice (“GMP”) manufacturing of CTX-8371. The GMP manufacturing campaign of CTX-8371 waswere completed in the secondfirst quarter of 2022.
Pending the results of the toxicology studies in non-human primates, we anticipate filing of2023. We are currently targeting an IND submission for CTX-8371 to the FDA in the third quarter of 2023 and initiating first-in-human studya clinical trial in the first halffourth quarter of 2023.
Operating ActivitiesOPERATING ACTIVITIES
We have funded our operations primarily with proceeds from the sale of our equity securities. Through SeptemberJune 30, 2022,2023, we have received $329.0$412 million in gross proceeds from the sale of our equity securities.
We have incurred significant operating losses since inception and have not generated any revenue from the sale of products and we do not expect to generate any revenue from the sale of products in the near future, if at all. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of our treatments and any future product candidates. Our net losses were $12.0$11.3 million and $6.0$8.5 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. Our net losses were $27.6$19.1 million and $69.2$15.7 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. We had an accumulated deficit of $261.2$292 million at Septemberon June 30, 2022.2023. We expect to continue to incur significant expenses for at least the next several years as we advance through clinical development, develop additional product candidates and seek regulatory approval of any product candidates that complete clinical development. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates.
Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity and debt financings, or other capital sources, which may include collaborations with other companies or other strategic transactions. As of SeptemberJune 30, 2022,2023, we had $120.6$169 million in cash, cash equivalents and marketable securities. On November 2, 2022, we entered into a securities purchase agreement ("the "Securities Purchase Agreement") with certain accredited investors (each an "Investor" and collectively, the "Investors") pursuant to which we agreed to sell and issue to the Investors in a private investment in public equity ("PIPE") financing an aggregate of 25,000,000 shares of our common stock at a purchase price of $3.21 per share. The gross proceeds to us from the PIPE are $80.3 million, before deducting fees to the placement agents and other offering expenses payable by us. Based on our research and development plans, weWe expect that such cash resources will enable us to fund our operating expenses and capital expenditure requirements into 2026.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. Our consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
COVID-19 Update
We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of our employees and to reduce the spread of COVID-19 community-wide. We are ensuring that essential staffing levels at our operations remain in place, including maintaining key personnel in our laboratory facilities. We have implemented stringent safety measures designed to create a safe and clean environment for our employees as we continue to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic.
There have been delays in sourcing of selected supplies required for the manufacturing of material to be used in our future clinical trials, and these delays have impacted and may continue to impact the timing of our future clinical trials. We expect that COVID-19 may continue to directly or indirectly impact (i) our employees and business operations or personnel at third-party suppliers and other vendors in the U.S. and other countries; (ii) the availability, cost or supply of materials; and (iii) the timeline for our ongoing clinical trial and potential future trials. We are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.
Components of Results of Operations
Research and Development
Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates, CTX-009, CTX-471, CTX-8371 and CTX-8371, as well as unrelated discovery program expenses.CTX-009. We expense research and development costs as incurred. These expenses include:
● | employee-related expenses including salaries, related benefits and equity-based compensation expense for employees engaged in research and development functions; |
● | expenses incurred under agreements with organizations that support our platform program development; |
● | Contract Manufacturing Organizations (“ |
● | the cost of acquiring and manufacturing nonclinical and clinical trial materials, including manufacturing registration and validation batches; |
● | costs related to compliance with quality and regulatory requirements; and |
● | facilities and equipment expenses. |
Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned clinical development activities in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any future product candidates.
The successful development and commercialization of product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters;matters, professional fees for accounting, auditing, tax, andinsurance, administrative consulting services; insurance costs; administrative travel expenses; marketing expenses and other operating costs.
We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our business operations.
Other Income (expense)
Other income (expense) consists of interest income interest expense and realized gains or losses on sales of furniture and equipment.marketable securities.
Results of Operations
Comparison of the Three Months Ended Septembermonths ended June 30, 20222023 and 20212022
The following table summarizes our results of operations for the three months ended SeptemberJune 30, 2023 and 2022 and 2021:(in thousands):
Three Months Ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | Change | Three Months Ended June 30, | |||||||||||||||||||||
(000’s) | 2023 | 2022 | Change | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | $ | 9,791 | $ | 3,154 | $ | 6,637 | $ | 10,223 | $ | 5,862 | $ | 4,361 | ||||||||||||
General and administrative | 2,807 | 2,700 | 107 | 3,114 | 3,125 | (11 | ) | |||||||||||||||||
Total operating expenses | 12,598 | 5,854 | 6,744 | 13,337 | 8,987 | 4,350 | ||||||||||||||||||
Loss from operations | (12,598 | ) | (5,854 | ) | (6,744 | ) | (13,337 | ) | (8,987 | ) | (4,350 | ) | ||||||||||||
Other income (expense) | 623 | (121 | ) | 744 | ||||||||||||||||||||
Other income | 2,059 | 493 | 1,566 | |||||||||||||||||||||
Loss before income tax expense | (11,975 | ) | (5,975 | ) | (6,000 | ) | (11,278 | ) | (8,494 | ) | (2,784 | ) | ||||||||||||
Income tax expense | — | — | — | — | — | — | ||||||||||||||||||
Net loss | $ | (11,975 | ) | $ | (5,975 | ) | $ | (6,000 | ) | $ | (11,278 | ) | $ | (8,494 | ) | $ | (2,784 | ) | ||||||
Research and Development Expenses
Research and development expenses increased by $6.6$4.4 million, or 210%74%, for the three months ended SeptemberJune 30, 20222023 compared to the three months ended SeptemberJune 30, 2021.2022. The increase primarily came from ana $4.6 million increase in the purchaseprogram-related expenses, which inherently change over time. We spent $5.9 million more on CTX-009 primarily for manufacturing and manufacturing of drug substanceclinical costs, and $1.3 million less for the CTX-009 program of $4.3 millionother two programs (CTX-471 and toxicological studiesCTX-8371) for CTX-8371 of $1.1 millionthe three months ended June 30, 2023 as compared to the same period in 2021.2022.
We track outsourced development, personnel costs and other research and development costs of specific programs. Research and development expenses are summarized by program in the table below:below (in thousands):
Three Months Ended September 30, | ||||||||||||||||
2022 | 2021 | Three Months Ended June 30, | ||||||||||||||
(000’s) | 2023 | 2022 | ||||||||||||||
CTX-009 | $ | 5,523 | $ | 177 | $ | 6,861 | $ | 942 | ||||||||
CTX-471 | 1,074 | 1,067 | 1,018 | 1,370 | ||||||||||||
CTX-8371 | 1,324 | 274 | 1,053 | 2,030 | ||||||||||||
Unallocated research and development expenses | 1,870 | 1,636 | 1,291 | 1,520 | ||||||||||||
Total research and development expenses | $ | 9,791 | $ | 3,154 | $ | 10,223 | $ | 5,862 | ||||||||
General and Administrative Expenses
General and administrative expenses increased by $0.1 million, or 4%, to $2.8remained consistent at $3.1 million for the three months ended SeptemberJune 30, 20222023 as compared to the same period in 2021.2022.
Other Income (Expense)income
For the three months ended SeptemberJune 30, 2023 and 2022, other income (expense) consists primarily of interest income of $0.6 million. The increase in interest income was due to the investment of our cash in marketable securities. For the three months ended September 30, 2021, the primary component was interest expense of $0.1 million related to a term loan facility with Pacific Western Bank, Inc. (the “Credit Facility”) which we extinguished in the fourth quarter of 2021. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for further information on the Credit Facility.income.
Income Tax Expense
During the three months ended SeptemberJune 30, 20222023 and 2021,2022, we recognized no income tax expense.
Comparison of the NineSix Months Ended SeptemberJune 30, 20222023 and 20212022
The following table summarizes our results of operations for the ninesix months ended SeptemberJune 30, 2023 and 2022 and 2021:(in thousands):
Nine Months Ended September 30, | ||||||||||||||||||||||||
2022 | 2021 | Change | Six Months Ended June 30, | |||||||||||||||||||||
(000’s) | 2023 | 2022 | Change | |||||||||||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | $ | 20,069 | $ | 10,763 | $ | 9,306 | $ | 16,862 | $ | 10,278 | $ | 6,584 | ||||||||||||
General and administrative | 8,698 | 7,500 | 1,198 | 6,183 | 5,891 | 292 | ||||||||||||||||||
In-process R&D | — | 50,618 | (50,618 | ) | ||||||||||||||||||||
Total operating expenses | 28,767 | 68,881 | (40,114 | ) | 23,045 | 16,169 | 6,876 | |||||||||||||||||
Loss from operations | (28,767 | ) | (68,881 | ) | 40,114 | (23,045 | ) | (16,169 | ) | (6,876 | ) | |||||||||||||
Other income (expense) | 1,136 | (306 | ) | 1,442 | ||||||||||||||||||||
Other income | 3,930 | 513 | 3,417 | |||||||||||||||||||||
Loss before income tax expense | (27,631 | ) | (69,187 | ) | 41,556 | (19,115 | ) | (15,656 | ) | (3,459 | ) | |||||||||||||
Income tax expense | — | (13 | ) | 13 | — | — | — | |||||||||||||||||
Net loss | $ | (27,631 | ) | $ | (69,200 | ) | $ | 41,569 | $ | (19,115 | ) | $ | (15,656 | ) | $ | (3,459 | ) | |||||||
Research and Development Expenses
Research and development expenses increased by $9.3$6.6 million, or 86%64%, for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 2021.2022. The increase primarily came from an increase in the purchaseprogram-related expenses of $7.1 million, which inherently change over time. We spent $9.3 million more on CTX-009 primarily for manufacturing and manufacturing of drug substance for program CTX-009 of $4.1 million, clinical costs, and $2.2 million less for program CTX-009 of $1.0 million, manufacturing of drug substancethe other two programs (CTX-471 and CTX-8371) for program CTX-8371 of $1.6 million and toxicological studies for CTX-8371 of $1.1 millionthe six months ended June 30, 2023 as compared to the same period in 2021.2022.
We track outsourced development, personnel costs and other research and development costs of specific programs. Research and development expenses are summarized by program in the table below:below (in thousands):
Nine Months Ended September 30, | ||||||||||||||||
2022 | 2021 | Six Months Ended June 30, | ||||||||||||||
(000’s) | 2023 | 2022 | ||||||||||||||
CTX-009 | $ | 6,991 | $ | 282 | $ | 10,778 | $ | 1,518 | ||||||||
CTX-471 | 3,788 | 2,763 | 1,886 | 2,666 | ||||||||||||
CTX-8371 | 4,277 | 2,083 | 1,578 | 2,952 | ||||||||||||
Unallocated research and development expenses | 5,013 | 5,635 | 2,620 | 3,142 | ||||||||||||
Total research and development expenses | $ | 20,069 | $ | 10,763 | $ | 16,862 | $ | 10,278 | ||||||||
General and Administrative Expenses
General and administrative expenses increased by $1.2$0.3 million, or 16%5%, to $8.7$6.2 million for the ninesix months ended SeptemberJune 30, 2022,2023, as compared to the same period in 2021. The increase primarily came from an increase of $1.2 million of stock compensation expense.2022.
In-Process R&D
In the second quarter of 2021, we acquired TRIGR Therapeutics, Inc., whose primary asset is CTX-009, an anti-DLL4 x VEGF-A bispecific antibody. As we expense research and development costs as incurred, the cost of this acquisition was expensed to In-Process R&D. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for further information description of the accounting of this transaction. There were no In-Process R&D expenses for the nine months ended September 30, 2022.
Other income (expense)
For the ninesix months ended SeptemberJune 30, 2023 and 2022, other income (expense) consists primarily of interest of $1.1 million and gain on disposal of assets of $70 thousand. For the nine months ended September 30, 2021, the primary component was interest expense of $0.3 million related to the Credit Facility which we extinguished in the fourth quarter of 2021. See our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 for further information on the Credit Facility.income.
Income Tax Expense
During the ninesix months ended SeptemberJune 30, 2023 and 2022, we recognized no income tax expense. During the nine months ended September 30, 2021, we recognized $13 thousand of income tax expense.
Liquidity and Capital Resources
Since our inception, we have devoted substantially all of our efforts to organizing and staffing our Company, business planning, raising capital, research and development activities, building our intellectual property portfolio and providing general and administrative support for these operations. We have funded our operations primarily with proceeds from the sale of our equity securities (in addition, we received borrowings from the Credit Facility, which was extinguished in the fourth quarter of 2021).securities. Through SeptemberJune 30, 2022,2023, we have received $329.0$412 million in gross proceeds from the sale of equity securities. As of SeptemberJune 30, 2022,2023, we had cash, cash equivalents and marketable securities of $120.6$169 million. In November 2022,
Through June 2023, we completed a PIPE financingsold through our at-the-market (“ATM”) agreement with grossJefferies LLC, 951,873 shares of common stock at an average price of $3.28 for total proceeds of $80.3$3.1 million and net proceeds of $3.0 million. (see Note 11 to the financial statements contained in this Form 10-Q for further description of this transaction).
Funding Requirements
Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
● | the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates; |
● | the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization; |
● | the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates; |
● | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims; |
● | the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies; |
● | our ability to establish additional collaborations on favorable terms, if at all; |
● | the costs required to scale up our clinical, regulatory and manufacturing capabilities; |
● | the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval; and |
● | revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval. |
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, current stockholders’ interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drugproduct candidates, or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, limit, reduce or terminate our research, product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Cash Flows
The following table shows a summary of our cash flows for the periods indicated:indicated (in thousands):
Nine Months Ended September 30, | ||||||||
2022 | 2021 | |||||||
(000’s) | ||||||||
Cash used in operating activities | $ | (23,484 | ) | $ | (15,001 | ) | ||
Cash used in investing activities | (104,554 | ) | (994 | ) | ||||
Cash provided by (used in) financing activities | 5 | (5,625 | ) | |||||
Net change in cash, cash equivalents and restricted cash | $ | (128,033 | ) | $ | (21,620 | ) | ||
Six Months Ended June 30, | ||||||||
2023 | 2022 | |||||||
Cash used in operating activities | $ | (22,342 | ) | $ | (12,542 | ) | ||
Cash provided by (used in) investing activities | 3,602 | (105,734 | ) | |||||
Cash provided by financing activities | 3,072 | — | ||||||
Net change in cash and cash equivalents | $ | (15,668 | ) | $ | (118,276 | ) | ||
Operating Activities
During the ninesix months ended SeptemberJune 30, 2022,2023, we used $23.5$22.3 million of cash in operating activities, resulting from our net loss of $27.6$19.1 million offset by non-cash charges andplus the change in operating assets and liabilities of $4.1 million. Our$5.4 million, partially offset by non-cash charges are primarilyof $2.2 million (primarily from share-based compensation expense of $4.3 million and depreciation and amortization (including ROU asset amortization) of $1.4 million.$2.9 million).
During the ninesix months ended SeptemberJune 30, 2021,2022, we used $15.0$12.5 million of cash in operating activities, resulting from our net loss of $69.2$15.7 million plus the change in operating assets and liabilities of $0.9 million, partially offset by non-cash charges of $54.7 million. Our non-cash charges are$4.0 million (primarily from the TRIGR acquisition expense of in-process R&D of $50.6 million, share-based compensation expense of $2.8 million and depreciation and amortization of $0.4 million.$3.0 million).
Investing Activities
During the ninesix months ended SeptemberJune 30, 2023, $3.6 million of cash was provided by investing activities, primarily related to the net sale of marketable securities. During the six months ended June 30, 2022, we used $104.6$105.7 million of cash in investing activities which primarily related to $117.3 million used tothe purchase marketable securities offset by the proceeds from sale or maturities of marketable securities of $12.8 million. During the nine months ended September 30, 2021, cash used in investing activities was $1.0 million which was primarily attributed to $0.8 million in leasehold improvements and purchases of equipment.securities.
Financing Activities
During the ninesix months ended SeptemberJune 30, 2022, we2023, $3.1 million of cash was provided by financing activities. This primarily included $3.0 million of net cash from sale of common stock under an ATM Agreement, after issuance costs. We had a small number of options exercised for $5 thousand. Duringno financing activities during the ninesix months ended SeptemberJune 30, 2021, we had $5.6 million in payments under the Credit Facility.2022.
Future Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing activities. The timing and amount of our operating expenditures will depend largely on:
● | the initiation, progress, timing, costs and results of clinical trials for our product |
● | the initiation, progress, timing, costs and results of nonclinical studies for our product candidates or any future product candidates we may develop; |
● | our ability to maintain our relationships with key collaborators; |
● | the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more nonclinical studies or clinical trials than those that we currently expect or change their requirements on studies that had previously been agreed to; |
● | the cost to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights; |
● | the effect of competing technological and market developments; |
● | the costs of continuing to grow our business, including hiring key personnel and maintain or acquiring operating space; |
● | market acceptance of any approved product candidates, including product pricing, as well as product coverage and the adequacy of reimbursement by third-party payors; |
● | the cost of acquiring, licensing or investing in additional businesses, products, product candidates and technologies; |
● | the cost and timing of selecting |
● | the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approval and that we determine to |
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We believe that our existing cash, cash equivalents and marketable securities as of filing of the form 10-Q will enable us to fund our operating expenses and capital expenditure requirements into 2026 based on our current plans, which may change based on clinical or preclinicalpre-clinical results. These plans include initiation and completion of ainclude: A Phase 2/3 and two Phase 2 clinical trialtrials of CTX-009, in combination with paclitaxel in BTC, initiation of a Phase 2 trial of CTX-009 in colorectal cancer, completion of the ongoing Phase 1b clinical trial of CTX-471, initiation of a Phase 1b combination trial for CTX-471 with KEYTRUDA and commencement of the planneda Phase 1 developmenttrial of CTX-8371, subject to satisfactory completion of IND-enabling activities for that product candidate.CTX-8371. We expect that we will require additional funding to complete the clinical development of CTX-009, CTX-471 and CTX-8371,the three programs, commercialize our product candidates, if we receive regulatory approval, and pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for CTX-009, CTX-471 or CTX-8371 or other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize these product candidates.candidates ourselves.
Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable since we are a smaller reporting company.
Item 4. Controls and Procedures.
Management’s Evaluation of ourOur Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Operating Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of SeptemberJune 30, 2022.2023. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of SeptemberJune 30, 2022,2023, our Chief Executive Officer and Chief Operating Officer (Principal Financial Officer) concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended SeptemberJune 30, 20222023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
As of the date of this Quarterly Report on Form 10-Q, we are not involved in any material legal proceedings. However, from time to time, we could be subject to various legal proceedings and claims that arise in the ordinary course of our business activities. Regardless of the outcome, legal proceedings can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 20212022, which could materially affect our business, financial condition, or results of operations.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
On November 9, 2022, we issued a press release announcing our financial results for the quarter ended September 30, 2022. A copy of this press release is attached as Exhibit 99.1 to this Quarterly Report. The information regarding this press release in this Item 5 (including Exhibit 99.1) shall not be deemed "filed" for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.None.
Exhibit Number |
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101.INS |
| Inline XBRL Instance Document – the instance document does not appear in Interactive Data File because its XBRL tags are embedded within the Inline XBRL Document |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
** These exhibits are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act or the Exchange Act, except as otherwise stated in such filing.
Pursuant to the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Date: | August 3, 2023 | By: | /s/ Thomas Schuetz | |
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| Thomas Schuetz, MD | ||
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| Chief Executive Officer (Principal Executive Officer) | ||
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Date: | August 3, 2023 | By: | /s/ Vered Bisker-Leib | |
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| Vered Bisker-Leib, PhD | ||
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| President and Chief Operating Officer (Principal Financial Officer) | ||
Date: | August 3, 2023 | By: | /s/ Neil Lerner | |
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| Neil Lerner, CPA | ||
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| Vice President - Finance | ||