What changed in this filing

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Item 1. Financial Statements

2023-05-04 compared with 2022-11-09 · 231 added, 457 removed, 337 unchanged (67% of the section changed)

4 unchanged sentences

(In thousands, except par value)

September 30,

Current assets:

4 unchanged sentences

148,143  

151,663  

Prepaid expenses and other current assets

10 unchanged sentences

$ 1,125  

$ 3,382  

Accrued expenses

11,690  

Operating lease obligations, current portion

1 unchanged sentence

11,190  

16,169  

Operating lease obligations, long-term portion

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300,000 shares authorized;

101,286 and 101,303 shares issued at September 30, 2022 and December 31, 2021, respectively;

101,032 and 100,832 shares outstanding at September 30, 2022 and December 31, 2021, respectively

126,507 and 126,495 shares issued at March 31, 2023 and December 31, 2022, respectively;

126,375 and 126,302 shares outstanding at March 31, 2023 and December 31, 2022, respectively

Additional paid-in-capital

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and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

(In thousands, except per share data)

Three Months Ended

September 30,

Nine Months Ended

September 30,

Operating expenses:

1 unchanged sentence

General and administrative

In-process R&D

Total operating expenses

Loss from operations

Other income (expense), net

Loss before income tax expense

3 unchanged sentences

Other comprehensive loss:

Unrealized loss on marketable securities

Unrealized gain on marketable securities

Comprehensive loss

8 unchanged sentences

Balance at December 31, 2022

100,832  

$ 373,657  

$ ( 233,589 )  

$ 140,078  

Vesting of share-based awards

Stock-based compensation

( 7,162 )  

Common stock issued upon exercise of options

Unrealized gain on marketable securities

Balance at March 31, 2023

100,905  

375,231  

( 240,751 )  

134,490  

Vesting of share-based awards

Stock-based compensation

Unrealized loss on marketable securities

( 512 )  

( 8,494 )  

Balance at June 30, 2022

100,968  

376,675  

( 512 )  

( 249,245 )  

126,928  

Vesting of share-based awards

Stock-based compensation

Exercise of common stock options

Unrealized loss on marketable securities

( 129 )  

( 11,975 )  

Balance at September 30, 2022

101,032  

$ 377,967  

$ ( 641 )  

$ ( 261,220 )  

$ 116,116  

Accumulated Other Comprehensive

Stockholders'

Balance at December 31, 2021

51,221  

$ 191,348  

$ ( 151,408 )  

$ 39,945  

Vesting of share-based awards

Stock-based compensation

( 7,422 )  

Balance at March 31, 2022

51,313  

192,296  

( 158,830 )  

33,471  

Common shares issued for TRIGR acquisition

10,265  

50,299  

50,300  

Vesting of share-based awards

Stock-based compensation

( 55,804 )  

Balance at June 30, 2021

61,666  

243,503  

( 214,634 )  

28,875  

Vesting of share-based awards

Stock-based compensation

( 5,975 )  

Balance at September 30, 2021

61,760  

$ 244,490  

$ ( 220,608 )  

$ 23,888  

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3 unchanged sentences

(In thousands)

For the Nine Months

Ended September 30,

For the Three Months

Ended March 31,

Cash flows from operating activities:

$ ( 27,631 )  

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation and amortization

Gain on disposal of equipment

( 70 )  

Noncash interest expense

Share-based compensation

Amortization of premium and discount on marketable securities

( 190 )  

Write-off of in-process R&D

50,618  

ROU asset amortization

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Accrued expenses

( 3,033 )  

Operating lease liability

( 818 )  

Net cash used in operating activities

( 23,484 )  

Cash flows from investing activities:

Purchases of property and equipment

( 158 )  

Purchases of marketable securities

( 117,332 )  

Proceeds from sale or maturities of marketable securities

12,760  

Asset acquisition costs

Proceeds from sale of equipment

Net cash used in investing activities

( 104,554 )  

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock

Repayment of borrowings under loan

Net cash provided by (used in) financing activities

Net change in cash, cash equivalents and restricted cash

( 128,033 )  

Cash, cash equivalents and restricted cash at beginning of period

144,514  

47,339  

Cash, cash equivalents and restricted cash at end of period

$ 16,481  

$ 25,719  

Supplemental disclosure of cash flow information

Cash paid for interest

Proceeds from exercise of stock options

Net cash provided by financing activities

Net change in cash and cash equivalents

Cash and cash equivalents at beginning of period

Cash and cash equivalents at end of period

Supplemental disclosure of cash flow information

ROU asset acquired through operating leases

$ 5,148  

Unrealized loss on marketable securities

Acquisition of Trigr Therapeutics, Inc.

$ 50,300  

Unrealized gain on marketable securities

Acquisition of equipment included in accrued expenses

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Notes to Unaudited Condensed Consolidated Financial Statements

        Nature of Business and Basis of Presentation

Compass Therapeutics, Inc.

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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 our proprietary drug candidates as long as their continued development is supported by clinical and nonclinical data.

We plan to advance our product candidates through clinical development as both standalone therapies and in combination with our proprietary product candidates as long as their continued development is supported by clinical and nonclinical data.

References to Compass or the Company herein include Compass Therapeutics, Inc.

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In addition, the Company is dependent upon the services of its employees and consultants.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s consolidated financial position as of September 30, 2022 and its consolidated results of operations, comprehensive loss and changes in stockholders’

equity for the three and nine months ended September 30, 2022 and 2021 and cash flows for the nine months ended September 30, 2022 and 2021.

Operating results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s consolidated financial position as of March 31, 2023 and its consolidated results of operations, comprehensive loss and changes in stockholders’

equity for the three months ended March 31, 2023 and 2022 and cash flows for the three months ended March 31, 2023 and 2022.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

The unaudited condensed consolidated financial statements include the accounts of Compass Therapeutics, Inc.

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The condensed consolidated balance sheet at December 31, 2022 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.

Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2021 ( the “Annual Report”).

Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements in the Company’s Annual Report on Form 10 -K for the fiscal year ended December 31, 2022 (the “Annual Report”).

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.

To date, we have funded our operations primarily with proceeds from the sale of our equity securities and borrowings from debt arrangements. 

Through September 30, 2022, we have received $ 329.0 million in gross proceeds from the sale of equity securities. 

As of September 30, 2022, we had cash, cash equivalents and marketable securities of $ 120.6 million.

On November 2, 2022, the Company issued additional common stock pursuant to a private investment in public equity ("PIPE") offering with gross proceeds of $80.3 million (see Note 11 ).

We have funded our operations with proceeds from the sale of our equity securities and borrowing from debt arrangements.

Through March 31, 2023, we have received $ 409 million in gross proceeds from the sale of equity securities.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $ 175 million.

Based on our research and development plans, we expect that such cash resources will enable us to fund our operating expenses and capital expenditure requirements into 2026.

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 have been monitoring the COVID- 19 pandemic and its potential impact on our business.

There have been delays in sourcing of selected supplies required for the manufacturing of material to be used in our clinical trials, and these delays have impacted and may impact the timing of our future clinical trials.

It is possible that COVID- 19 may continue to impact the timeline for our ongoing clinical trials 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.

        Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report, except as noted below.

Marketable Securities

Marketable securities consist of available-for-sale debt securities and are carried at fair value.

Unrealized holding gains and losses are reported within other comprehensive loss in the Company's Consolidated Statements of Comprehensive Loss.

Fair value is based on available market information including quoted market prices, broker or dealer quotations, or other observable inputs.

Accounting Pronouncements not yet adopted

In June 2016, the FASB issued ASU No.

2016 - 13, “Financial Instruments-Credit Losses:

Measurement of Credit Losses on Financial Instruments”

which has subsequently been amended by ASU No.

2019 - 04, ASU No.

2019 - 05, ASU No.

2019 - 10, ASU No.

2019 - 11, and ASU No.

2020 - 03 (“ASU 2016 - 03”

This guidance replaces the incurred loss impairment methodology under current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates.

This guidance is effective for the Company for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022 and must be adopted using a modified retrospective approach, with certain exceptions.

The Company is currently evaluating the impact of this standard on its financial statements and related disclosures.

Recently Adopted Accounting Pronouncements

The Company adopted ASU 2019 - 12, Simplifying the Accounting for Income Taxes , on January 1, 2022.

The Company accounts for income taxes pursuant to FASB ASC Topic 740, Income Taxes .

Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes.

The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences.

The Company maintains a valuation allowance with respect to deferred tax assets.

The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period.

Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the federal tax laws.

The adoption of ASU 2019 - 12 did not have any impact on the Company’s condensed consolidated financial statement presentation or disclosures.

Summary of Significant Accounting Policies

There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report.

Fair Value Measurements

The following tables represent the Company’s financial assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

Fair Value Measurements as of March 31, 2023 Using:

Quoted Prices in

Active Markets for

Identical Assets

Significant Other

Corporate bonds

Commercial paper

Certificates of deposit

government treasuries

Asset-backed securities

Cash equivalents

Fair Value Measurements as of December 31, 2022 Using:

Quoted Prices in

Active Markets for

Identical Assets

Significant Other

Corporate bonds

Commercial paper

Certificates of deposit

Asset-backed securities

Cash equivalents

Marketable Securities

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The Company believes the individual unrealized losses represent temporary declines primarily resulting from interest rate changes.

Realized gains and losses are included in other income (loss) in the condensed consolidated statements of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a trade date basis.

The Company classifies marketable securities that are available for use in current operations as current assets on the condensed consolidated balance sheet.

The following tables summarize marketable securities held at September 30, 2022 ( in thousands):

Fair Value Measurements as of September 30, 2022 Using:

Realized gains and losses are included in other income (loss) in the consolidated statements of operations and comprehensive loss and are determined using the specific identification method with transactions recorded on a trade date basis.

The Company classifies marketable securities that are available for use in current operations as current assets on the consolidated balance sheet.

The following tables summarize marketable securities held (in thousands):

As of March 31, 2023

Amortized Cost

Unrealized gains

Unrealized Losses

Corporate bonds

1 unchanged sentence

Certificates of deposit

government treasuries

Asset-backed securities

September 30, 2022

Maturing in one year or less

Maturing after one year through two years

There were no marketable securities as of December 31, 2021.

        Fair Value Measurements

Fair Value Measurements as of September 30, 2022 Using:

Quoted Prices in

Active Markets

Identical Assets

Significant Other

As of December 31, 2022

Amortized Cost

Unrealized gains

Unrealized Losses

Corporate bonds

2 unchanged sentences

Asset-backed securities

Cash and cash equivalents

Fair Value Measurements as of December 31, 2021 Using:

Quoted Prices in

Active Markets

Identical Assets

Significant Other

Cash and cash equivalents

        Property and Equipment

March 31, 2023

December 31, 2022

Maturing in one year or less

Maturing after one year through two years

Property and Equipment

Property and equipment consist of the following (in thousands):

September 30,

$ 5,137  

Leasehold improvements

2 unchanged sentences

Accumulated depreciation

( 5,762 )  

Property and equipment, net

Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 0.2 million and $ 0.1 million, respectively.

Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 0.6 million and $ 0.4 million, respectively.   

        Accrued Expenses

$ 1,373  

$ 1,567  

Depreciation expense for each of three months ended March 31, 2023 and 2022 was $ 0.2 million.

Accrued Expenses

Accrued expenses consist of the following (in thousands):

September 30,

Compensation and benefits

Project expenses

Accrued milestone

Compensation and benefits

Total accrued expenses

       Commitments and Contingencies

The Company adopted ASU 2016 - 02, Leases (Topic 842 ) , effective January 1, 2021, using the modified retrospective transition method, in which the new standard is applied as of the date of initial adoption.

Project expenses are primarily from $ 8.1 million of accrued manufacturing expenses.

These expenses are mostly for the manufacture and purchase of drug product for CTX- 009 including $ 6.6 million of minimum contractual obligations.

Commitments and Contingencies

The Company adopted ASU 2016 - 02, Leases (Topic 842 ) (“ASU 2016 - 02”

), effective January 1, 2021, using the modified retrospective transition method, in which the new standard is applied as of the date of initial adoption.

The Company recognized and measured agreements executed prior to the date of initial adoption that were considered leases on January 1, 2021.

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The Facility lease contains scheduled rent increases over the lease term.

The discount rate used for the Facility lease is 6.25 %, and the remaining lease term of the Facility lease is two years and eight months as of September 30, 2022.

The discount rate used for the Facility lease is 6.25 %, and the remaining lease term of the Facility lease is two years and two months as of March 31, 2023. 

Cash payments related to the Facility were $ 0.3 million for the periods ending March 31, 2023 and 2022.

The table below presents the undiscounted cash flows for the lease term.

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Operating lease obligations, long-term portion

$ 1,520  

Milestone payments

As part of the ABL Bio Agreement (see Note 10 ), the Company is obligated to pay certain development milestone payments.

In the fourth quarter of 2021, the Company was notified of the completion of Phase 1 of the clinical trial for CTX- 009.

In the third quarter of 2022, the Company paid a $ 6.0 million milestone payment to ABL Bio based on delivery of the final report related to completion of Phase 1 of the clinical trial.

        Stock-Based Compensation

Stock-based compensation expense for the three and nine months ended September 30, 2022 and 2021 was classified in the condensed consolidated statement of operations as follows:

Three Months Ended September 30,

Nine Months Ended September 30,

(000’s)

As part of the ABL Bio Agreement, the Company is obligated to pay certain development milestone payments.

See Note 11 for additional information on the ABL Bio Agreement.

Stock-Based Compensation

Stock-based compensation expense for the three months ended March 31, 2023 and 2022 was classified in the condensed consolidated statement of operations as follows:

Three Months Ended March 31,

(000’s)

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General and administrative

As of September 30, 2022, remaining unrecognized stock-based compensation cost from all plans to be recognized in future periods totaled $ 11.5 million.

As of March 31, 2023, remaining unrecognized stock-based compensation cost from all plans to be recognized in future periods totaled $ 18.2 million.

Restricted Stock:

Prior to the adoption of the 2020 Plan, the Company issued restricted stock.

A summary of the Company’s restricted stock activity during the nine months ended September 30, 2022 is as follows:

A summary of the Company’s restricted stock activity during the three months ended March 31, 2023 is as follows:

Weighted Average Fair Value

(000 ’

Unvested, December 31, 2022

Forfeited or canceled

Unvested, September 30, 2022

As of September 30, 2022, the total unrecognized compensation cost related to stock compensation expense for restricted stock is $ 0.4 million, expected to be recognized over a weighted average period of 1.1 years.

Unvested, March 31, 2023

As of March 31, 2023, the total unrecognized compensation cost related to stock compensation expense for restricted stock is $ 0.2 million, expected to be recognized over a weighted average period of 0.6 years.

In June 2020, the Company’s board of directors adopted the 2020 Stock Option and Incentive Plan (the “2020 Plan”) and reserved 2.9 million shares of common stock for issuance under this plan.

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The increase on January 1, 2023 was 5.1 million shares.

As of September 30, 2022, 2.2 million shares remain available for future grant.

As of March 31, 2023, 5.5 million shares remain available for grant.

The 2020 Plan authorizes the board of directors or a committee of the board to grant incentive stock options, nonqualified stock options, restricted stock awards and restricted stock units ("RSUs") to eligible officers, employees, consultants and directors of the Company.

Options generally vest over a period of four years and have a contractual life of 10 years from the date of grant.

Options generally vest over a period of four years and have a contractual life of ten years from the date of grant.

Stock Options:

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Forfeited/canceled

Outstanding at September 30, 2022

Vested at September 30, 2022

For the nine months ended September 30, 2022, the weighted average grant date fair value for options granted was $ 2.30 .

The intrinsic value for options vested as of September 30, 2022, was $ 19 thousand.

As of September 30, 2022, the total unrecognized compensation cost related to outstanding options was $ 7.5 million, to be recognized over a weighted average period of 2.8 years.

For the nine months ended September 30, 2021, the weighted average grant date fair value for options granted was $ 3.82 .

There was no intrinsic value for options vested as of September 30, 2021.

The weighted average assumptions used in the Black-Scholes pricing model to determine the fair value of stock options granted during the nine months ended September 30, 2022 and 2021 were as follows:

Nine Months Ended September 30,

Outstanding at March 31, 2023

Vested at March 31, 2023

For the three months ended March 31, 2023, the weighted average grant date fair value for options granted was $ 2.95 .

The intrinsic value for options vested as of March 31, 2023, was $ 0.5 million.

As of March 31, 2023, the total unrecognized compensation cost related to outstanding options was $ 11.5 million, to be recognized over a weighted average period of 3.2 years.

For the three months ended March 31, 2022, the weighted average grant date fair value for options granted was $ 1.77 .

There was no intrinsic value for options vested as of March 31, 2022.

The weighted average assumptions used in the Black-Scholes pricing model to determine the fair value of stock options granted during the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended March 31,

Expected term (in years)

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Expected dividend yield

As of January 2023, the Company used the historical price of only its own stock to determine the expected volatility.

Prior to this, a group of industry peers including the Company’s stock price was used.

The following table summarizes the RSU activity for the 2020 Plan:

Average Price

Average Fair Value

Average Fair Value ($000's)

Unvested, December 31, 2022

Forfeited or canceled

Unvested, September 30, 2022

Weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants.

Unvested, March 31, 2023

The weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants.

The weighted average fair value is the weighted average share price times the number of shares.

As of September 30, 2022, remaining unrecognized compensation cost related to RSUs to be recognized in future periods totaled $ 3.6 million, which is expected to be recognized over a weighted average period of 3.1 years.

       Other Income (Expense)

Other income (expense) consisted of the following:

Three Months Ended

Nine Months Ended

September 30,

Interest income

$ 1,066  

Interest expense

( 78 )  

Realized gain on disposal of equipment

( 44 )  

Total other income (expense)

$ ( 121 )  

$ 1,136  

     License, Research and Collaboration Agreements

As of March 31, 2023, remaining unrecognized compensation cost related to RSUs to be recognized in future periods totaled $ 6.4 million, which is expected to be recognized over a weighted average period of 3.3 years.

Related Parties and Related-Party Transactions

There were no material related party transactions during the quarters ended March 31, 2023 and 2022.

Other income consisted of interest income on marketable securities.

Interest income was $ 1.9 million and $ 20 thousand for the three months ended March 31, 2023 and 2022, respectively.

License, Research and Collaboration Agreements

Collaboration Agreements

ABL Bio Corporation ("ABL Bio") Agreement

In November 2018, the Company's wholly-owned subsidiary, TRIGR, and ABL Bio, a South Korean biotechnology company, entered into an exclusive global (excluding South Korea) license agreement (the “TRIGR License Agreement”) which granted TRIGR a license to ABL001, ABL Bio’s bispecific antibody targeting DLL4 and VEGF-A (renamed CTX- 009 ).

Under the terms of the agreement, ABL Bio and TRIGR would jointly develop CTX- 009, with ABL Bio responsible for development of CTX- 009 throughout the end of Phase 1 clinical trials and TRIGR responsible for the development of CTX- 009 from Phase 2 and onward.

ABL Bio received a $ 5 million upfront payment, a $ 6 million development milestone for the completion of Phase 1 clinical trials and is eligible to receive a total of up to $ 110 million of development and regulatory milestone payments, up to $ 295 million of commercial milestone payments and tiered single-digit royalties on net sales of CTX- 009 in Oncology.

As a result of the TRIGR acquisition in 2021, the TRIGR License Agreement was assigned to the Company and the Company has assumed all the rights and liabilities of the agreement.

In November 2018, the Company and ABL Bio, a South Korean biotechnology company, entered into an exclusive global (excluding South Korea) license agreement which granted the Company a license to CTX- 009 ( ABL001 ), ABL Bio’s bispecific antibody targeting DLL4 and VEGF-A.

Under the terms of the agreement, the two companies would jointly develop CTX- 009, with ABL Bio responsible for development of CTX- 009 throughout the end of Phase 1 clinical trials and the Company responsible for the development of CTX- 009 from Phase 2 and onward.

ABL Bio received a $ 5 million upfront payment and $ 6 million development milestone payment.

In addition, ABL Bio is eligible to receive up to $ 96 million of development and regulatory milestone payments, and up to $ 303 million of commercial milestone payments and tiered single-digit royalties on net sales of CTX- 009 in oncology.

ABL Bio is also eligible to receive up to $ 75 million in development and regulatory milestones and up to $ 110 million in commercial milestone payments and tiered, single-digit royalties on net sales of CTX- 009 in ophthalmology.

In May 2021, the Company and ABL Bio terminated license agreements to several preclinical assets.

As a result of the return of these assets to ABL Bio and termination of the license agreements, the Company is eligible to receive royalty payments if ABL Bio develops or licenses two bispecific antibodies that were previously licensed to the Company.

Adimab Agreement

The Company entered into a collaboration agreement with Adimab, LLC on October 16, 2014.

The agreement includes provisions for payment of royalties at rates ranging in the single digits as a percentage of future net sales within a specified term from the first commercial sale.

There were no milestone payments made during the first nine months of 2022.

As of September 30, 2022, future potential milestone payments in connection with this agreement amounted to $ 2.0 million.

      Other License and Research Agreements

FUJIFILM Diosynth Biotechnologies ("Fujifilm ”

The Company entered into a scope of work (“SOW”) under a master services agreement with Fujifilm on July 20, 2020.

The Company made no cash payments and recorded $ 89 thousand in research and development expense during the three months ended September 30, 2022 related to this agreement.

The Company made cash payments of $ 0.5 million and recorded $ 2.9 million in research and development expense during the nine months ended September 30, 2022.

As of September 30, 2022, future payments in connection with the SOW amounted to approximately $ 0.6 million and future expenses amounted to less than $ 100 thousand. 

      Subsequent events

On November 2, 2022, the Company and certain accredited investors (each an “Investor”

and collectively, the “Investors”) entered into a securities purchase agreement (the “Securities Purchase Agreement”) pursuant to which the Company agreed to sell and issue to the Investors in a PIPE financing an aggregate of 25,000,000 shares of the Company’s common stock at a purchase price of $ 3.21 per share.

The gross proceeds to the Company from the PIPE are $ 80.3 million, before deducting fees to the placement agents and other offering expenses payable by the Company.

This transaction closed on November 4, 2022.

The agreement includes provisions for payment of royalties at rates ranging in the single digits as a percentage of future net sales within a specified term from the first commercial sale for certain antibodies, including our product candidate, CTX- 471.

There were no milestone payments made during the first three months of 2023.

As of March 31, 2023, future potential milestone payments in connection with this agreement amounted to $ 2.0 million.

Management ’

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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 period ended September 30, 2022.

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 period ended March 31, 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.

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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, we consummated a definitive merger agreement (the “Merger Agreement”) with TRIGR Therapeutics, Inc.

(“TRIGR”), a private biotechnology company.

Pursuant to the Merger Agreement, through our wholly-owned subsidiaries and a two-step merger structure, we acquired all of the outstanding shares of TRIGR (the “TRIGR Merger”).

Consideration payable to TRIGR shareholders at closing totaled an aggregate of 10,265,133 shares of 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.

In January 2023, we 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 other drugs, assessment of additional indications for our product candidates and various pre-clinical studies further expanding our understanding of mechanisms of action, synergistic activities and optimal combinations of the product candidates.

We believe that these activities will allow us to focus our resources on our three product candidate programs, unlock the therapeutic potential of these programs and combinations thereof, and subsequently enhance the return on investment for our 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 2023.

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, 2021 .

For a more detailed description, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 .

CTX-009 (a.k.a.

ABL001) - anti-DLL4 x VEGF-A bispecific antibody

CTX-009 is an investigational bispecific antibody that simultaneously blocks Delta-like ligand 4/Notch-1 ("DLL4") and vascular endothelial growth factor A ("VEGF-A") signaling pathways, which are critical to angiogenesis and tumor vascularization.

CTX-009 is an investigational bispecific antibody that is designed to simultaneously block DLL4 and 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.

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(“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.

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.

Our 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 indications based on a number of factors, including CTX-009 activity observed in the Phase 1, 1b and 2 clinical trials, lack of effective therapies for these patient populations in the targeted lines of therapy and the potential for a straight-forward regulatory route to approval.

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.

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 –

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 as our lead indication based on activity observed in the Phase 1b and Phase 2 studies, lack of effective therapies for this patient population and the potential for a straight-forward regulatory route to approval.

Our Phase 2/3 study for CTX-009 in combination with paclitaxel is targeting the second line BTC patient population, including all four anatomical subtypes of the disease.

In the United States, there 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 diagnosed 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, are only targeting 1-3% of the colorectal cancer patients.

Accordingly, we are initiating a Phase 2 monotherapy clinical trial of CTX-009 in the third and fourth line settings in patients with advanced colorectal cancer with ORR as the primary endpoint of this study.

We intend to explore the potential of CTX-009 in additional indications, based on preclinical and clinical data from CTX-009 studies.

These studies combined suggest the potential of CTX-009 as a therapy for gastric cancer, ovarian cancer, pancreatic cancer and renal cell cancer. 

In addition, we are developing a plan to study the combination of CTX-009 with our novel bispecific checkpoint blocker, CTX-8371, or with other checkpoint blockers, such as pembrolizumab and nivolumab.

Additionally, we plan to study the combination of CTX-009 with our novel CD137 agonistic antibody, CTX-471.

The timing of the initiation of our clinical trials in the United States depends, among other things, on the availability of clinical drug product for the studies, communications with the FDA, FDA allowance for each of the proposed studies to proceed and the availability of cash resources to support such trials. 

Food and Drug Administration (the “FDA”) in December 2021 for CTX-009 and the FDA cleared our IND application in January 2022.

The following trials are being conducted in the United States under this IND.

Following conversations with the FDA, we initiated 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.

The trial will 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 and the secondary endpoints include progression free survival, disease control rate, duration of response and overall survival.

The trial can be found on www.clinicaltrials.gov (Identifier NCT 05506943).

In addition, we initiated a Phase 2 monotherapy clinical trial to assess the safety and efficacy of CTX-009 in patients with metastatic colorectal cancer who have received two or three prior systemic therapies.

The trial utilizes a Simon Two-Stage adaptive design where the criteria to advance to the second stage of the trial is three partial responses observed in 37 patients enrolled in Part A 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.

The trial can be found on www.clinicaltrials.gov (identifier NCT 05513742).

DEVELOPMENT PLANS FOR CTX-009

We intend to explore the potential of CTX-009 in additional indications, based on data from pre-clinical models, potential biomarkers such as DLL4, and clinical data from CTX-009 trials providing signs of potential activity of CTX-009 in additional indications such as ovarian cancer, gastric cancer, pancreatic cancer, renal cell cancer, liver 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, and with other checkpoint blockers, such as pembrolizumab and atezolizumab.

Additionally, we are considering the combination of CTX-009 with our novel CD137 agonistic antibody, CTX-471, which is currently in a Phase 1b clinical trial in patients with advanced solid tumors.

CTX-471 - a monoclonal antibody agonist of CD137

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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- 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 reestablishment of the same tumor.

In July 2019, we initiated a Phase 1 trial evaluating the safety and tolerability of CTX-471 as a monotherapy in oncology patients who were previously treated with PD-1 or PD-L1 immune checkpoint inhibitors and subsequently relapsed or progressed after a period 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.

The dose expansion stage of the trial is currently ongoing and nearing completion.

As of September 30, 2022, 60 patients with 18 different cancers have been enrolled in the study 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 stage 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.

PROGRAM UPDATE –

On October 11, 2022, we announced a clinical trial collaboration and supply agreement with Merck & Co.

(“Merck”) to evaluate CTX-471 in combination with KEYTRUDA®

In 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-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 re-establishment of the same tumor.

The 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 human 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 activity of CTX-471 required the presence of CD4+ T-cells, CD8+ T-cells, and NK cells, indicating a coordinated involvement of both innate and adaptive immune cells.

Encouragingly, treatment of tumors in mice with CTX-471 led to a marked reprogramming of the immune component of the tumor microenvironment.

We also observed that tumors treated with CTX-471 had an approximate two-fold reduction in the number of immunosuppressive tumor-associated macrophages.

In addition, we have observed potent activity in other syngeneic tumor models including tumor eradication in the A20 model of lymphoma, the MC38 model of colon carcinoma and in the EMT6 model of breast cancer.

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.

In October 2022, we announced a clinical collaboration 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 are the study sponsor, Merck will provide the clinical supply of KEYTRUDA and together, we will form a Joint Development Committee to review the clinical trial results.

In November 2022, we began screening patients for this combination arm of the Phase 1b study to include CTX-471 combined with KEYTRUDA in patients who have progressed following initial response to a PD-1 regimen.

CTX-8371 - a bispecific antibody that targets PD-1 and PD-L1

Compass is the study sponsor and Merck provides the clinical supply of KEYTRUDA®.

Additionally, we formed a joint development committee (“JDC”) with Merck to review the results of this clinical trial.

In November 2022, we announced the first patient was dosed in the combination arm of the Phase 1 trial.

This combination arm is enrolling patients with metastatic or locally advanced non-small cell lung cancer, melanoma, small cell lung cancer, mesothelioma and head and neck cancer that have progressed after treatment with a PD-1 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.

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.

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. 

IND-enabling studies with CTX-8371 were initiated in August 2020 and 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 was completed in the second quarter of 2022.

Pending the results of the toxicology studies in non-human primates, we anticipate filing of an IND and initiating first-in-human study in the first half of 2023.

We completed our first GMP manufacturing campaign for CTX-8371 in the second quarter of 2022.

IND-enabling studies on CTX-8371, including GLP toxicology studies in non-human primates were completed in the first quarter of 2023.

We are currently targeting an IND submission for CTX-8371 to the FDA in the third quarter of 2023 and initiating a clinical trial in the second half of 2023.

OPERATING ACTIVITIES

We have funded our operations primarily with proceeds from the sale of our equity securities.

Through September 30, 2022, we have received $329.0 million in gross proceeds from the sale of our equity securities. 

Through March 31, 2023, we have received $409 million in gross proceeds from the sale of 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 million and $6.0 million for the three months ended September 30, 2022 and 2021, respectively.

Our net losses were $27.6 million and $69.2 million for the nine months ended September 30, 2022 and 2021, respectively.

We had an accumulated deficit of $261.2 million at September 30, 2022.

Our net losses were $7.8 million and $7.2 million for the three months ended March 31, 2023 and 2022, respectively.

We had an accumulated deficit of $281 million at March 31, 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.

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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 September 30, 2022, we had $120.6 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, we expect that such cash resources will enable us to fund our operating expenses and capital expenditure requirements into 2026. 

As of March 31, 2023, we had $175 million in cash, cash equivalents and marketable securities.

We 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.

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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.

Our 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 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 have been monitoring the COVID-19 pandemic and its potential impact on our business.

It is possible that COVID-19 may continue to impact the timeline for our ongoing clinical trials 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.

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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 and CTX-8371, as well as unrelated discovery program expenses.

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates, CTX-471, CTX-8371 and CTX-009.

We expense research and development costs as incurred.

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expenses incurred under agreements with organizations that support our platform program development;

Contract Manufacturing Organizations (“CMOs”) that are primarily engaged to provide drug substance and product for our clinical trials, research and development programs, as well as investigative sites and consultants that conduct our clinical trials, nonclinical studies and other scientific development services;

Contract Manufacturing Organizations (“CMO”) that are primarily engaged to provide drug substance and product for our clinical trials, research and development programs, as well as investigative sites and consultants that conduct our clinical trials, nonclinical studies and other scientific development services;

the cost of acquiring and manufacturing nonclinical and clinical trial materials, including manufacturing registration and validation batches;

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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;

professional fees for accounting, auditing, tax and administrative consulting services;

insurance costs;

administrative travel expenses;

marketing expenses and other operating costs.

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, business development and administrative functions.

General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax, insurance, administrative travel 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.

Other income consists of interest income on marketable securities.

Results of Operations

Comparison of the Three Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the three months ended September 30, 2022 and 2021:

Three Months Ended September 30,

(000’s)

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Other income (expense)

Loss before income tax expense

Income tax expense

Research and Development Expenses

Research and development expenses increased by $6.6 million, or 210%, for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

The increase primarily came from an increase in the purchase and manufacturing of drug substance for the CTX-009 program of $4.3 million and toxicological studies for CTX-8371 of $1.1 million as compared to the same period in 2021. 

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:

Three Months Ended September 30,

(000’s)

Unallocated research and development expenses

Total research and development expenses

General and Administrative Expenses

General and administrative expenses increased by $0.1 million, or 4%, to $2.8 million for the three months ended September 30, 2022 as compared to the same period in 2021.

Other Income (Expense)

For the three months ended September 30, 2022, other income (expense) consists 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 Tax Expense

During the three months ended September 30, 2022 and 2021, we recognized no income tax expense.

Comparison of the Nine Months Ended September 30, 2022 and 2021

The following table summarizes our results of operations for the nine months ended September 30, 2022 and 2021:

Nine Months Ended September 30,

Comparison of the Three Months Ended March 31, 2023 and 2022

The following table summarizes our results of operations for the three months ended March 31, 2023 and 2022:

Three Months Ended March 31,

(000’s)

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General and administrative

In-process R&D

Total operating expenses

Loss from operations

Other income (expense)

Other income 

Loss before income tax expense

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Research and Development Expenses

Research and development expenses increased by $9.3 million, or 86%, for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

The increase primarily came from an increase in the purchase and manufacturing of drug substance for program CTX-009 of $4.1 million, clinical costs for program CTX-009 of $1.0 million, manufacturing of drug substance for program CTX-8371 of $1.6 million and toxicological studies for CTX-8371 of $1.1 million as compared to the same period in 2021.

We track outsourced development, personnel costs and other research and development costs of specific programs.

Research and development expenses increased by $2.2 million, or 50%, for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

The increase came from a $2.5 million increase in program-related expenses which inherently change over time.

We spent $3.3 million more on CTX-009 and $0.8 million less for the other two programs (CTX-471 and CTX-8371) for the three months ended March 31, 2023 as compared to the same period in 2022.

We track outsourced development, outsourced personnel costs and other research and development costs of specific programs.

Research and development expenses are summarized by program in the table below:

Nine Months Ended September 30,

Three Months Ended March 31,

(000’s)

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General and Administrative Expenses

General and administrative expenses increased by $1.2 million, or 16%, to $8.7 million for the nine months ended September 30, 2022, as compared to the same period in 2021.

The increase primarily came from an increase of $1.2 million of stock compensation expense.

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 nine months ended September 30, 2022, other income (expense) consists 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.

General and administrative expenses increased by $0.3 million, or 11%, to $3.1 million for the three months ended March 31, 2023 as compared to the same period in 2022.

For the three months ended March 31, 2023 and 2022, other income consists exclusively of interest income.

Income Tax Expense

During the nine months ended September 30, 2022, we recognized no income tax expense.

During the nine months ended September 30, 2021, we recognized $13 thousand of income tax expense.

During the three months ended March 31, 2023 and 2022, we recognized no income tax expense.

Liquidity and Capital Resources

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). 

Through September 30, 2022, we have received $329.0 million in gross proceeds from the sale of equity securities.

As of September 30, 2022, we had cash, cash equivalents and marketable securities of $120.6 million. 

In November 2022, we completed a PIPE financing with gross proceeds of $80.3 million.

(see Note 11 to the financial statements contained in this Form 10-Q for further description of this transaction).

We have funded our operations primarily with proceeds from the sale of our equity securities.

Through March 31, 2023, we have received $409 million in gross proceeds from the sale of equity securities.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $175 million.

Funding Requirements

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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 drug candidates, or grant licenses on terms that may not be favorable to us.

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 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, 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.

The following table shows a summary of our cash flows for the periods indicated:

Nine Months Ended September 30,

Three Months Ended March 31,

(000’s)

Cash used in operating activities

Cash used in investing activities

Cash provided by (used in) financing activities

Net change in cash, cash equivalents and restricted cash

Cash provided by (used in) investing activities

Cash provided by financing activities

Net change in cash and cash equivalents

Operating Activities

During the nine months ended September 30, 2022, we used $23.5 million of cash in operating activities, resulting from our net loss of $27.6 million, offset by non-cash charges and the change in operating assets and liabilities of $4.1 million.

Our non-cash charges are primarily from share-based compensation expense of $4.3 million and depreciation and amortization (including ROU asset amortization) of $1.4 million.

During the nine months ended September 30, 2021, we used $15.0 million of cash in operating activities, resulting from our net loss of $69.2 million, offset by non-cash charges of $54.7 million.

Our non-cash charges are 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.

During the three months ended March 31, 2023, we used $12.2 million of cash in operating activities, resulting from our net loss of $7.8 million plus the change in operating assets and liabilities of $5.6 million, partially offset by non-cash charges of $1.2 million (primarily from share-based compensation expense of $1.3 million).

During the three months ended March 31, 2022, we used $7.9 million of cash in operating activities, resulting from our net loss of $7.2 million plus the change in operating assets and liabilities of $2.8 million, partially offset by non-cash charges of $2.0 million (primarily from share-based compensation expense of $1.6 million).  

Investing Activities

During the nine months ended September 30, 2022, we used $104.6 million of cash in investing activities which primarily related to $117.3 million used to 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.

During the three months ended March 31, 2023, $4.3 million of cash was provided by investing activities related to marketable securities.

During the three months ended March 31, 2022, we used $0.2 million of cash in investing activities which primarily related to leasehold improvements.

Financing Activities

During the nine months ended September 30, 2022, we had a small number of options exercised for $5 thousand.

During the nine months ended September 30, 2021, we had $5.6 million in payments under the Credit Facility.

During the three months ended March 31, 2023, we had $41 thousand in proceeds from the exercise of stock options.

We had no financing activities during the three months ended March 31, 2022.

Future Funding Requirements

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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 candidate or any future product candidates we may develop;

the initiation, progress, timing, costs and results of clinical trials for our product candidates or any future product candidates we may develop;

the initiation, progress, timing, costs and results of nonclinical studies for our product candidates or any future product candidates we may develop;

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the cost of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;

the cost and timing of selecting, auditing and potentially validating a manufacturing site for commercial-scale manufacturing;

the cost and timing of selecting and validating a manufacturing site for commercial-scale manufacturing;

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 commercialize.

our need to implement additional internal systems and infrastructure, including financial and reporting systems.

We believe that our existing cash 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 preclinical results.

These plans include initiation and completion of a Phase 2/3 clinical trial 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 planned Phase 1 development of CTX-8371, subject to satisfactory completion of IND-enabling activities for that product candidate. 

We expect that we will require additional funding to complete the clinical development of CTX-009, CTX-471 and CTX-8371, 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.

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 pre-clinical results.

These plans include:

three Phase 2 clinical trials of CTX-009, a Phase 1b combination trial for CTX-471 and a Phase 1 trial of CTX-8371.

We expect that we will require additional funding to complete the clinical development of the three programs, commercialize our product candidates, if we receive regulatory approval, and pursue in-licenses or acquisitions of other product candidates.

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.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements