What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-12 compared with 2020-11-09 · 115 added, 205 removed, 157 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties.

Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption “Risk Factors” in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2020.

On July 6, 2020, we completed our acquisition of Kiq Bio LLC (formerly Kiq LLC), a Delaware limited liability company (“Kiq”), in accordance with the terms of the Agreement and Plan of Merger, dated July 6, 2020 (the “Merger Agreement”).

On October 2, 2020, we filed an amendment to our certificate of incorporation to change our name from Unum Therapeutics Inc.

to Cogent Biosciences, Inc.

The name change became effective on October 6, 2020.

In connection with the name change, our common stock began trading under the ticker symbol “COGT.”

We are a biotechnology company focused on developing precision therapies for genetically defined diseases.

Our most advanced program, PLX9486, is a clinical-stage, selective KIT D816V inhibitor that is being developed to treat systemic mastocytosis (“SM”) and gastrointestinal stromal tumor (“GIST”) patients.

PLX9486 has been administered to more than 50 advanced solid tumor and GIST patients in a Phase 1 / 2 clinical trial, with the vast majority of those patients living with advanced GIST.

GIST is a disease frequently driven by mutations in the KIT tyrosine kinase, and resistance to therapy can be seen with the emergence of new KIT mutations.

Anti-tumor activity for PLX9486 was observed in both single agent and combination settings, including in combination with sunitinib, an approved treatment option for GIST patients.

Clinical data for PLX9486 were previously presented by Plexxikon, a member of the Daiichi Sankyo Group, at the Connective Tissue Oncology Society meeting in November 2017, and the American Society of Clinical Oncology meeting in June 2018.

On July 6, 2020, we shared updated clinical data in 18 patients dosed with PLX9486 in combination with sunitinib as part of our corporate presentation describing the Kiq acquisition, showing median progression free survival of eleven months.

This was a heavily-treated advanced GIST population, where 72 percent of patients had previously been treated with sunitinib, 66 percent of patients had received three-or-more Tyrosine kinase inhibitors (“TKIs”), and 50 percent of patients had received four-or-more TKIs.

The overall response rate was 16.6 percent, including two partial responses and one complete response.

Based on these results, we are planning an FDA interaction to explore further clinical development of PLX9486 in combination with sunitinib in GIST patients, and plan to initiate an additional clinical study in GIST in the second half of 2021.

In addition to continuing the development of PLX9486 in GIST patients, we are pursuing development of the compound in patients living with advanced systemic mastocytosis (“ASM”) and indolent systemic mastocytosis (“ISM”).

The vast majority of ASM patients have a KIT D816V mutation, and have a significantly diminished quality of life with median survival less than 3.5 years.

For patients with ISM, there are no available approved therapies, and while their lifespan is not impacted by the disease, these patients suffer from a poor quality of life and new treatment options are badly needed.

Our approach is to design rational precision therapies that treat the underlying cause of disease and improve the lives of patients.

Our most advanced program is CGT9486, a selective tyrosine kinase inhibitor designed to potently inhibit the KIT D816V mutation as well as other mutations in KIT exon 17.

In the vast majority of cases, KIT D816V is responsible for driving Systemic Mastocytosis (“SM”), a serious disease caused by unchecked proliferation of mast cells.

Exon 17 mutations are also found in patients with advanced gastrointestinal stromal tumors (“GIST”), a type of cancer with strong dependence on oncogenic KIT signaling.

CGT9486 is a highly selective and potent KIT inhibitor with the potential to provide a new treatment option for these patient populations.

CGT9486 has been administered to more than 50 advanced solid tumor and GIST patients in a Phase 1/2 clinical trial, with the vast majority of those patients living with advanced GIST.

GIST is a disease frequently driven by KIT mutations, and resistance to currently available therapeutics is frequently associated with the emergence of other KIT mutations.

Anti-tumor activity for CGT9486 was observed in both single agent and combination settings, including in combination with sunitinib, an approved treatment option for GIST patients.

Clinical data from this trial have been presented at several scientific conferences, including most recently by Cogent at the 2020 annual CTOS meeting, and previously by Plexxikon, Inc.

(“Plexxikon”), a member of the Daiichi Sankyo Group, at the 2018 annual American Society of Clinical Oncology (“ASCO”) meeting and the 2017 annual Connective Tissue Oncology Society (“CTOS”) meeting.

Within the group of 15 heavily pre-treated GIST patients who received the combination of CGT9486 and sunitinib, and who had not received prior treatment with CGT9486, the confirmed objective response rate (“ORR”) was twenty percent, including two partial responses and one complete response, while the estimated median progression free survival (“mPFS”) for this group was twelve months.

Four subjects continued to receive CGT9486 via individual patient INDs beyond the conclusion of the trial.

Based on these results, we are planning an FDA interaction to explore further clinical development of CGT9486 in combination with sunitinib in GIST patients, and plan to initiate an additional clinical study in GIST in the second half of 2021.

In addition to continuing the development of CGT9486 in GIST patients, we are pursuing development of the compound in patients living with Advanced Systemic Mastocytosis (“AdvSM”) and Non-Advanced Systemic Mastocytosis (“Non-AdvSM”).

The vast majority of AdvSM and Non-AdvSM patients have a KIT D816V mutation.

Patients with AdvSM have a significantly diminished lifespan with a median survival of less than 3.5 years.

For patients with Non-AdvSM, there are no available approved therapies, and while their lifespan is not impacted by the disease, these patients suffer from a poor quality of life and new treatment options are badly needed.

Emerging clinical data for other kinase inhibitors with activity against KIT D816V have shown that the disease is highly sensitive to inhibition of the target.

PLX9486 was specifically designed to selectively inhibit KIT mutations on exon 17, including KIT D816V, and we aim to expand the clinical development of this program to treat systemic mastocytosis patients.

Subject to feedback from regulatory authorities, we expect to initiate clinical trials in ASM patients in the first half of 2021, followed by trials in ISM patients in the second half of 2021.

We expect to rapidly assess PLX9486 activity in mastocytosis patients by monitoring levels of serum tryptase, a relevant biomarker of disease activity which is elevated in these patients.

Worldwide rights to develop and commercialize PLX9486, as well as an additional selective KIT inhibitor, PLX0206, were exclusively licensed by Kiq from Plexxikon.

Under the terms of the May 2020 agreement, Plexxikon received an upfront payment and is eligible for additional development milestones and mid- to high- single-digit royalty payments.

Patents protecting PLX9486 include composition of matter claims which have issued in the US and other key territories and provide exclusivity through 2033 and potentially beyond.

CGT9486 was specifically designed to selectively inhibit KIT mutations on exon 17, including KIT D816V, and we aim to expand the clinical development of this program to treat systemic mastocytosis patients.

The FDA has cleared our Investigational New Drug (“IND”) submission for a Phase 2 study in patients with AdvSM, which remains on track for initiation in the first half of 2021.

Subject to feedback from regulatory authorities, we expect to initiate a clinical trial in Non-AdvSM patients in the second half of 2021.

We expect to rapidly assess CGT9486 activity in mastocytosis patients by monitoring levels of serum tryptase, a relevant biomarker of disease activity which is elevated in these patients.

Worldwide rights to develop and commercialize CGT9486, as well as an additional selective KIT inhibitor, CGT0206, are exclusively licensed from Plexxikon.

Under the terms of the license agreement, Plexxikon received an upfront payment and is eligible for additional development milestones and mid- to high- single-digit royalty payments.

Patents protecting CGT9486 include composition of matter claims which have issued in the US and other key territories and provide exclusivity through 2033 and potentially beyond through patent term extensions.

In addition to our small molecule efforts, we have developed proprietary technologies which enable cell therapy programs targeting cancers utilizing a patient's engineered T cells.

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All ACTR clinical trials are closed to further enrollment.

We anticipate completing all closeout activities of 3 of 4 ACTR clinical trials by December 31, 2020.

We anticipate closing out the last ACTR clinical trial in the first half of 2021.

With the acqu isition of Kiq and the focus on development of novel prec ision kinase inhibitors, we are directing our cell therapy efforts towards the identification of an external partner who will have responsibility for future development of the technology and developm ent of product candidates.

On August 28, 2020, we completed the sale of our BOXR technology and Autologous Cell Therapy Industrial Automation (“ACTIA”) technology (collectively, the “BOXR Platform”), to Sotio LLC (“Sotio”) (the “BOXR Platform Transaction”), pursuant to an asset purchase agreement by and among Cogent, Sotio and Sotio NV as Guarantor (the “BOXR Platform Purchase Agreement”).

Pursuant to the BOXR Platform Purchase Agreement, Sotio has agreed to pay us total cash consideration of up to $11.5 million, consisting of an upfront payment of $8.1 million ($1.73 million of which was placed in escrow for 90 days for general representations and warranties) and potential milestone payments of up to $3.4 million in the aggregate upon the achievement of certain milestones related to the issuance of Specified Claims (as described in the BOXR Platform Purchase Agreement) by the U.S.

Patent and Trademark Office and the European Patent Office.

We have completed all closeout activities for 3 of 4 ACTR clinical trials as of March 31, 2021 and we anticipate closing out the last ACTR clinical trial in the first half of 2021.

Since our inception in 2014, we have focused significant efforts and financial resources on establishing and protecting our intellectual property portfolio, conducting research and development of our product candidates, manufacturing drug product material for use in preclinical studies and clinical trials, staffing our company, and raising capital.

We do not have any products approved for sale and have not generated any revenue from product sales.

To date, we have funded our operations primarily with proceeds from the sales of preferred stock, our initial public offering of common stock and Concurrent Private Placement, and payments received under our Collaboration Agreement with Seattle Genetics.

On April 1, 2019, we filed a shelf registration statement on Form S-3 with the SEC.

The shelf registration statement allows us to sell from time-to-time up to $150.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for its own account in one or more offerings.

The terms of any offering under the shelf registration statement will be established at the time of such offering and will be described in a prospectus supplement filed with the SEC prior to the completion of any such offering.

Additionally, on April 1, 2019 and pursuant to the Form S-3, we entered into a Sales Agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”), pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $50.0 million through Cowen as the sales agent.

As of September 30, 2020, no shares have been issued or sold under this Sales Agreement.

On March 19, 2020, we entered into a Purchase Agreement (the “LPC Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which we may elect to sell to LPC up to $25.0 million in shares of our common stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement.

We do not have any products approved for

sale and have not generated any revenue from product sales.

To date, we have funded our operations primarily with proceeds from the sales of preferred stock, our public offerings of our common stock, private placements and payments received under our Collaboration Agreement with Seagen Inc., formerly Seattle Genetics .

On March 19, 2020, we entered into the LPC Purchase Agreement with LPC, pursuant to which we may elect to sell to LPC up to $25.0 million in shares of our common stock, subject to certain limitations and conditions set forth in the LPC Purchase Agreement.

Pursuant to the LPC Purchase Agreement, we issued 181,595 shares of common stock to LPC as a commitment fee.

As of September 30, 2020, 1,061,583 registered common shares have been sold to LPC under the LPC Purchase Agreement for proceeds of $10.7 million.

On March 26, 2020, we announced that we would be exploring strategic alternatives in order to maximize stockholder value and that we had engaged Ladenburg Thalmann & Co.

to act as our strategic financial advisor to assist in the strategic review process.

As of July 6, 2020, we successfully signed and closed the acquisition of Kiq.

On July 9, 2020, we completed Private Investment in Public Equity (“PIPE”) with existing and new investors to raise gross proceeds of $104.4 million in which the investors were issued shares of Series A Non-Voting Convertible Preferred Stock (“Series A Preferred Stock”) at a price of $880 per share or, $3.52 per share on an as-converted-to-common basis.

In August 2020, our board of directors unanimously approved an amendment to our certificate of incorporation, which would allow the board to effect a reverse stock split of all issued and outstanding shares of our common stock, at a ratio ranging from 1-for-4 to 1-for-8, inclusive, subject to stockholder approval.

On October 9, 2020, the Company filed a Definitive Proxy Statement which included the proposal that our stockholders approve the amendment to our certificate of incorporation to effect the reverse stock split and a proposal that the stockholders approve the conversion of the shares of Series A Preferred Stock issued in the Kiq acquisition and the private placement .

The proposals were approved by the stockholders at a special meeting held on November 6, 2020 and our board of directors approved a ratio of 1-for-4 for the reverse stock split.

The amendment to our certificate of incorporation to effect the reverse stock split at a ratio of 1-for-4 was filed with the Delaware Secretary of State on November 6, 2020.

In 2020, 2,412,870 registered common shares were sold to LPC under the LPC Purchase Agreement for proceeds of $25.0 million.

No additional shares may be or have been sold to LPC under the LPC Purchase Agreement.

On July 6, 2020, we issued a contingent value right (CVR), which was distributed to stockholders of record as of the close of business on July 6, 2020, and prior to the issuance of any shares to acquire Kiq or sold to the PIPE investors.

In November 2020, in partial settlement of the CVR obligation, we issued 707,938 shares of common stock.

In February 2021, we issued an additional 212,428 shares of common stock and paid $0.1 million in partial settlement of the CVR obligation.

On July 9, 2020, we completed a PIPE with existing and new investors to raise gross proceeds of $104.4 million, or net proceeds of $98.9 million after deducting commissions and offering costs, in which the investors were issued shares of Series A Preferred Stock at a price of $880 per share or, $3.52 per share on an as-converted-to-common basis.

On December 4, 2020, we completed an underwritten public offering of 11,794,872 shares of our common stock at a public offering price of $9.75 per share.

This included the exercise in full by the underwriters of their 30-day option to purchase up to 1,538,461 additional shares of common stock.

The net proceeds from the offering, after deducting the underwriting discounts and commissions and estimated offering expenses, were approximately $107.7 million.

Since our inception, we have incurred significant operating losses.

Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates.

Our net losses were $63.5 million for the nine months ended September 30, 2020.

As of September 30, 2020, we had an accumulated deficit of $187.4 million.

Our net loss was $11.7 million for the three months ended March 31, 2021 compared to a net loss of $6.1 million for the three months ended March 31, 2020.

As of March 31, 2021, we had an accumulated deficit of $210.4 million.

We expect to continue to incur significant expenses and operating losses for at least the next several years.

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hire additional clinical, scientific, and commercial personnel;

establish manufacturing capabilities in-house;

establish a commercial manufacturing source and secure supply chain capacity sufficient to provide commercial quantities of any product candidates for which we may obtain regulatory approval;

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Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately 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.

As of September 30, 2020, we had cash and cash equivalents of $129.4 million.

if we are able to generate product sales, we may not become profitable.

As of March 31, 2021, we had cash and cash equivalents of $230.7 million.

We expect that our current cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into 2024.

The COVID-19 Pandemic

In March 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which continues to spread throughout the United States and worldwide.

In March 2020, the World Health Organization declared the outbreak of a novel strain of coronavirus, or COVID-19, as a pandemic, which has spread throughout the United States and worldwide.

We could be materially and adversely affected by the risks, or the public perception of the risks, related to an epidemic, pandemic, outbreak, or other public health crisis, such as the recent outbreak of COVID-19.

We are monitoring the global outbreak and spread of COVID-19 and have taken steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic.

We continue to monitor the global outbreak and spread of COVID-19 and have taken steps to identify and mitigate the adverse impacts on, and risks to, our business posed by its spread and actions taken by governmental and health authorities to address the COVID-19 pandemic.

The spread of COVID-19 has caused us to modify our business practices, including implementing a work-from-home policy for all employees who are able to perform their duties remotely and restricting all nonessential travel, and we expect to continue to take actions as may be required or recommended by government authorities or as we determine are in the best interests of our employees, the patients we serve and other business partners in light of COVID-19.

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We will continue to work diligently with our partners and stakeholders to continue advancing our product candidate under regulatory review as well as in our clinical studies to the extent safe to do so for patients, caregivers and healthcare practitioners, and ensuring the continuity of our manufacturing and supply chain.

For additional information related to the potential impact of COVID-19 on our business, please read Part II-Item 1A, “Risk Factors” of this Quarterly Report on Form 10-Q.

Components of Our Results of Operations

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We expect that our revenue for the next several years will be derived primarily from any collaborations that we may enter into in the future.

In June 2015, we entered into a Collaboration Agreement with Seattle Genetics (the “Collaboration Agreement”).

Pursuant to the terms of the Collaboration Agreement, we and Seattle Genetics agreed to jointly develop two product candidates incorporating our ACTR platform and Seattle Genetics’ antibodies.

Under the Collaboration Agreement, we conduct preclinical research and clinical development activities related to the two specified product candidates through Phase 1 clinical development, and Seattle Genetics provides the funding for those activities.

As a result of the Collaboration Agreement with Seattle Genetics, we recognized revenue of $0.3 million and $1.0 million for the three months ended September 30, 2020 and 2019, respectively, and $7.9 million and $7.2 million for the nine months ended September 30, 2020 and 2019, respectively, related to the upfront payment received from Seattle Genetics under our Collaboration Agreement as well as reimbursements of research and development costs.

On January 16, 2020, we and Seattle Genetics announced an agreement to terminate the ATTCK-17-01 Phase 1 clinical trial and other research activities under the collaboration.

Pursuant to terms of the Termination Agreement, among other things, (i) Seattle Genetics paid us $5.75 million, (ii) Seattle Genetics surrendered, assigned and transferred to us all of its right, title and interest in the 207,961 shares of our common stock owned by Seattle Genetics, (iii) we will continue to be responsible for and pay all expenses for the wind-down of the ACTR-BCMA trial and (iv) Seattle Genetics paid all research and development costs incurred through the Termination Effective Date.

In June 2015, we entered into the Collaboration Agreement with Seagen.

Pursuant to the terms of the Collaboration Agreement, we and Seagen agreed to jointly develop two product candidates incorporating our ACTR platform and Seagen’s antibodies.

On January 16, 2020 (the “Termination Date”), we and Seagen announced an agreement to terminate the ATTCK-17-01 Phase 1 clinical trial and other research activities under the collaboration (the “Termination Agreement”).

Pursuant to terms of the Termination Agreement, among other things, (i) Seagen paid us $5.75 million, (ii) Seagen surrendered, assigned and transferred to us all of its right, title and interest in the 207,961 shares of our common stock owned by Seagen, (iii) we will continue to be responsible for and pay all expenses for the wind-down of the ACTR-BCMA trial and (iv) Seagen paid all research and development costs incurred through the Termination Effective Date.

In addition, the exclusivity provisions in the Collaboration Agreement terminate and each party will be free to research, develop and commercialize their individual intellectual property (either by themselves or with third parties, subject to the intellectual property rights of the other party.

In considering all facts known, including the suspension of the ATTCK-17-01 clinical trial as announced in November 2019 and the expected termination of the Collaboration Agreement in January 2020, as of December 31, 2019, we adjusted the estimated transaction price to be the $25.0 million upfront payment from 2015 and the total payments to be earned for preclinical research and clinical development activities through the Termination Date.

During the nine months ended September 30, 2020, we adjusted the transaction price to include the Termination Payment of $5.75 million as well as the aggregate fair value of $0.8 million as of January 16, 2020 of the 207,961 shares of common stock received.

All performance obligations have been completed as of September 30, 2020 and all revenue has been recognized under this collaboration agreement.

There is no remaining deferred revenue balance as of September 30, 2020.

All performance obligations were completed and all remaining revenue was recognized under the Collaboration Agreement and Termination Agreement in 2020.

Operating Expenses

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Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:

expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with third parties, such as consultants and contractors and contract research organizations (“CROs”);

the cost of manufacturing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants and contractors and contract manufacturing organizations (“CMOs”);

employee-related expenses, including salaries, related benefits, and stock-based compensation expense for employees engaged in research and development functions;

expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with third parties, such as consultants, contractors and contract research organizations (“CROs”);

the cost of manufacturing drug products for use in our preclinical studies and clinical trials, including under agreements with third parties, such as consultants, contractors and contract manufacturing organizations (“CMOs”);

employee-related expenses, inclu ding salaries, related benefits and stock-based compensation expense for employees engaged in research and development functions;

laboratory supplies and animal care;

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payments made under third-party licensing agreements.

Our research and development costs include costs for the development of product candidates that were developed Seattle Genetics and for which we have received reimbursement as specified in our Collaboration Agreement.

Our research and development costs include costs for the development of product candidates that were developed with Seagen, and for which we have received reimbursement as specified in our Collaboration Agreement.

We expense research and development costs as incurred.

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General and administrative expenses also include direct and allocated facility-related costs as well as professional fees for legal, patent, consulting, investor and public relations, accounting, and audit services.

We anticipate that our general and administrative expenses will increase in the future as of a result of the costs associated with the asset acquisition of PLX9486 as well as the expansion of operations subsequent to the acquisition.

Acquired In-process Research and Development (“IPR&D”)

We expense acquired IPR&D in connection with an asset acquisition when there is no alternative future use, as determined by Management in accordance with GAAP .

We anticipate that our general and administrative expenses will increase in the future as of a result of the costs associated with the expansion of operations to support our on-going clinical and preclinical activities.

Other Income (Expense)

Interest Income

Interest income consists of interest earned on our cash equivalents and marketable securities balances.

Interest income consists of interest earned on our cash equivalents balances.

Our interest income has not been significant due to low interest earned on invested balances.

Other income consists of sublease and miscellaneous income and expense unrelated to our core operations.

Other income consists of miscellaneous income and expense unrelated to our core operations, primarily income from subleasing a portion of our headquarters facilities.

Change in fair value of the CVR liability

This consists of changes in the fair value of the CVR liability.

Since our inception, we have not recorded any current or deferred tax benefit for the net losses we have incurred in each year or for our earned research and development tax credits, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized.

Since our inception, we have not recorded any current or deferred tax benefit for the net losses we have incurred in each year or for our research and development tax credits generated, as we believe, based upon the weight of available evidence, that it is more likely than not that our net operating loss carryforwards and tax credits will not be realized.

Accordingly, a full valuation allowance has been established against the deferred tax assets as of December 31, 2020.

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As of December 31, 2020, we had U.S.

federal and state net operating loss carryforwards of $109.8 million and $110.8 million.

Utilization of the U.S.

federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future.

These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income.

In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period.

As a result of the shares issued in July 2020 related to the acquisition of Kiq and the sale of Series A convertible preferred stock, the Company has likely experienced a change of control, as defined by Section 382.

If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the federal and state net operating loss carryforwards or research and development tax credit carryforwards would be subject to annual limitation under Section 382.

Under Section 382, the annual limitation is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required.

Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization.

The Company is completing a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception, as well as the resulting amount of the limitation on the Company's net operating loss carryforwards and research and development tax credit carryforwards.

federal and state net operating loss carryforwards of $63.1 million and $5.7 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2035.

Of the federal net operating loss carryforwards at December 31, 2020, $59.9 million is available to be carried forward indefinitely but can only offset 80% of taxable income per year.

As of December 31, 2020, we also had U.S.

federal and state research and development tax credit carryforwards of $0.6 million and $0.3 million, respectively, which may be available to offset future income tax liabilities and begin to expire in 2040 and 2035, respectively.

As of December 31, 2019, we have Massachusetts investment tax credits of $0.1 million which generally have a 3 year carryover period.

As a result of the shares issued in July 2020 related to the acquisition of Kiq and the sale of Series A convertible preferred stock, the Company has experienced a change in ownership, as defined by Section 382.

As a result of the ownership change, utilization of the federal and state net operating loss carryforwards and research and development tax credit carryforwards is subject to annual limitation under Section 382.

This limitation resulted in the expiration of federal and state net operating loss carryforwards before utilization of $26.9 million and $79.5 million, respectively, and federal and state research and development tax credit carryforwards before utilization of $6.6 million and $2.0 million, respectively.

We have written off these gross deferred tax attributes, which were previously fully reserved for, in 2020.

As of December 31, 2020, approximately $59.4 million and $3.9 million of federal and state net operating losses, respectively, as well as $14.2 million of future amortization for federal purposes are subject to the July 2020 limitation of $0.3 million per year.

A second ownership change occurred in December 2020 as a result of the underwritten public offering of common stock which resulted in a limitation of tax attributes generated from July 7, 2020 to December 1, 2020.

The December 1, 2020 ownership change is not expected to have a material impact to the Company’s net operating loss carryforwards or research and development tax credit carryforwards as these net operating losses and tax credit carryforwards may be utilized, subject to annual limitation, assuming sufficient taxable income is generated before expiration.

We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.

Results of Operations

Comparison of the three months ended September 30, 2020 and 2019

The following table summarizes our results of operations for the three months ended September 30, 2020 and 2019:

Three Months Ended September 30,

(in thousands)

Collaboration revenue

Operating expenses:

Research and development

General and administrative

Acquired in-process research and development

Total operating expenses

Loss from operations

Other income (expense):

Interest income

Gain on disposal of long-lived assets

Change in fair value of CVR liability

Total other income (expense), net

Collaboration Revenue

Collaboration revenue recognized during the three months ended September 30, 2020 and 2019 was $0.3 million and $1.0 million, respectively, this decrease is due to the termination of the Collaboration Agreement with Seattle Genetics.

We recognize revenue from the upfront payment we received as well as ongoing reimbursements of research and development costs from Seattle Genetics by applying the costs-to-cost method over the performance period.

Collaboration revenue fluctuates based upon our pattern of performance for each performance obligation and changes in estimated transaction price and costs to complete our performance obligations.

All performance obligations under the Collaboration Agreement are complete as of September 30, 2020 and all revenue has been recognized under this collaboration agreement.

There is no remaining deferred revenue balance as of September 30, 2020.

Research and Development Expenses

Three Months Ended September 30,

(in thousands)

Direct research and development expenses:

Legacy programs

Unallocated expenses:

Personnel related (including stock-based compensation)

Laboratory supplies, facility related and other

Total research and development expenses

Research and development expenses decreased by $5.3 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019 primarily due to the conclusion of our legacy clinical trials and preclinical efforts and a reduced headcount, related to the restructuring, offset by stock compensation expense charges of $1.4 million based on the acceleration of all outstanding options related to the Kiq acquisition.

The three months ended September 30, 2020 includes a change in estimate of $0.8 million which resulted in a cost reversal for amounts associated with our legacy clinical trials.

General and Administrative Expenses

General and administrative expenses for the three months ended September 30, 2020 were $5.6 million, compared to $2.7 million for the three months ended September 30, 2019.

The increase in general and administrative expenses was primarily due to an increase personnel costs of $1.5 million based on the acceleration of all outstanding options related to the Kiq acquisition.

Professional and consultant fees and facility and other costs increased $1.4 million as a result of the transactions occurring during the three-months ended September 30, 2020, including increased legal, audit and consulting costs.

Acquired In-process Research and Development (“IPR&D”)

We expensed acquired IPR&D, with an estimated fair value of $46.9 million, including $2.1 million of associated transaction costs, in connection with the Kiq asset acquisition as there was no alternative future use, as determined by Management in accordance with GAAP .

Interest Income

Interest income for the three months ended September 30, 2020 and 2019 remained consistent at $0.1 million as a result of lower interest rates on the invested balances in the current year.

Gain on disposal of long-lived assets

Gain on disposal of long-lived assets, net increased to $7.5 million for the three months ended September 30, 2020 compared to $0.1 million for the three months ended September 30, 2019.

The 2020 gain represents the net proceeds of the sale of BOXR Platform assets as well as the proceeds from the sale of other long-lived assets in the three months ended September 30, 2020.

The prior year gain is the result of the sale of certain long-live assets.

Other income for the three months ended September 30, 2020 represents sublease income recognized resulting from the sublease of a portion of our leased office space to Sotio.

No sublease income was recorded for the three months ended September 30, 2019.

Change in fair value of CVR liability

Change in fair value of CVR liability for the three months ended September 30, 2020 represents the change in the fair value of the CVR liability.

Comparison of the nine months ended September 30, 2020 and 2019

The following table summarizes our results of operations for the nine months ended September 30, 2020 and 2019:

Nine Months Ended September 30,

Comparison of the three months ended March 31, 2021 and 2020

The following table summarizes our results of operations for the three months ended March 31, 2021 and 2020:

Three Months Ended March 31,

(in thousands)

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General and administrative

Acquired in-process research and development

Total operating expenses

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Interest income

Gain on disposal of long-lived assets

Change in fair value of CVR liability

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Collaboration Revenue

Collaboration revenue recognized during the nine months ended September 30, 2020 and 2019 was $7.9 million and $7.2 million, respectively, this increase due to the recognition of revenue from payments received from Seattle Genetics under our recently terminated Collaboration Agreement.

Collaboration revenue fluctuates based upon our pattern of performance for each performance obligation and changes in estimated transaction price and costs to complete our performance obligations.

On January 16, 2020, Cogent and Seattle Genetics entered into an agreement to terminate the Collaboration Agreement (the “Termination Agreement”) effective as of January 16, 2020 (the “Termination Effective Date”), pursuant to which the parties will cease all research, development, manufacturing and other exploitations of any and all research candidates and development candidates under the Collaboration Agreement, including, without limitation, the development candidate ACTR-BCMA and a research candidate.

Pursuant to terms of the Termination Agreement, among other things, (i) Seattle Genetics paid Cogent $5.75 million and (ii) Seattle Genetics surrendered, assigned and transferred to Cogent all of its right, title and interest in the 207,961 shares of Cogent’s common stock owned by Seattle Genetics.

We adjusted the estimated transaction price to be the $25.0 million upfront payment from 2015 and the total payments to be earned for preclinical research and clinical development activities through the Termination Date.

We also adjusted the costs to complete the remaining performance obligations to represent our best estimate as of September 30, 2020.

Revenue during the nine months ended September 30, 2020 includes the termination payments previously discussed.

All performance obligations have been completed as of September 30, 2020 and all revenue has been recognized under this collaboration agreement.

There is no remaining deferred revenue balance as of September 30, 2020.

No collaboration revenue was recognized during the three months ended March 31, 2021.

Collaboration revenue recognized during the three months ended March 31, 2020 was $7.0 million.

We recognized revenue from the upfront payment we received as well as ongoing reimbursements of research and development costs from Seagen by applying the costs-to-cost method over the performance period.

On January 16, 2020, Cogent and Seagen announced an agreement to terminate the ATTCK-17-01 Phase 1 clinical trial and other research activities under the collaboration.

All performance obligations were completed and all remaining revenue was recognized under the Collaboration Agreement and Termination Agreement in 2020.

Research and Development Expenses

Nine Months Ended September 30,

(in thousands)

Direct research and development expenses:

Legacy programs

Unallocated expenses:

Personnel related (including stock-based compensation)

Laboratory supplies, facility related and other

Total research and development expenses

Research and development expenses decreased by $13.7 million for the nine months ended September 30, 2020 compared to nine months ended September 30, 2019 primarily due to the conclusion of our legacy clinical trials and preclinical efforts and a reduced headcount, related to the restructuring, offset by stock compensation expense charges of $1.4 million based on the acceleration of all outstanding options related to the Kiq acquisition.

The nine months ended September 30, 2020 includes a change in estimate of $0.8 million which resulted in a cost reversal for amounts associated with our legacy clinical trials.

Research and development expenses were $8.2 million for the three months ended March 31, 2021, compared to $9.5 million for the three months ended March 31, 2020.

The decrease in research and development expense during the three months ended March 31, 2021 compared to the three months ended March 31, 2020 is driven by the conclusion of our legacy cell therapy clinical efforts and the reduction in force in March 2020.

These decreases are partially offset by increased costs associated with the development of CGT9486.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2020 were $12.1 million, compared to $8.3 million for the nine months ended September 30, 2019.

The increase in general and administrative expenses was primarily due to increased personnel costs of $2.8 million, which includes stock compensation expense charges of $1.4 million based on the acceleration of all outstanding options related to the Kiq acquisition.

Professional and consultant fees and facility and other costs of have increased $1.0 million as a result of the significant transactions occurring during the nine-months ended September 30, 2020, including increased legal, audit and consulting costs .

Acquired In-process Research and Development (“IPR&D”)

General and administrative expenses for the three months ended March 31, 2021 were $4.6 million, compared to $3.7 million for the three months ended March 31, 2020.

The increase in general and administrative expenses was primarily due to an increase of $0.5 million in stock-based compensation expense and facility costs which was partially offset by a decrease in salary expense due to the reduction in force in March 2020.

Interest Income

Interest income for the nine months ended September 30, 2020 and 2019 was $0.1 million and $0.2 million, respectively.

Interest income decreased due to lower invested balances in the current year compared to the prior period.

Gain on disposal of long-lived assets

Gain on disposal of long-lived assets, net increased to $7.5 million for the nine months ended September 30, 2020 compared to $0.1 million for the nine months ended September 30, 2019.

The 2020 gain represents the net proceeds of the sale of BOXR Platform assets as well as the proceeds from the sale of other long-lived assets in the nine months ended September 30, 2020.

The prior year gain is the result of the sale of certain long-live assets.

Other income for the nine months ended September 30, 2020 represents sublease income recognized resulting from the sublease of a portion of our leased office space to Sotio.

No sublease income was recorded for the nine months ended September 30, 2019.

Interest income for the three months ended March 31, 2021 was $0.1 million, compared to $0.1 million for the three months ended March 31, 2020.

The impact of higher average invested balances in the current year was offset by lower interest rates in the current year compared to the prior period.

Other I ncome

Other income, net was $0.6 million in the three months ended March 31, 2021.

Other income represents sublease income recognized resulting from the sublease of a portion of our leased office space.

No sublease income was recorded for the three months ended March 31, 2020.

Change in Fair Value of CVR Liability

Change in fair value of CVR liability for the nine months ended September 30, 2020 represents the change in the fair value of the CVR liability.

The change in fair value of CVR liability for the three months ended March 31, 2021, represents the remeasurement of the CVR liability as a result of changes in our stock price prior to issuance of the common stock issued in partial settlement of the CVR.

Liquidity and Capital Resources

The COVID-19 outbreak created various impacts to our financials as a result of taking necessary precautions for essential personnel to operate safely both in person as well as remotely.

We have incurred certain costs related to the COVID-19 outbreak as a result of taking necessary precautions for essential personnel to operate safely both in person as well as remotely.

Costs incurred include items like incremental payroll costs, consulting support, IT infrastructure and facilities related costs.

The estimated impact of COVID-19 for the year is currently unknown.

The estimated impact of COVID-19 is currently unknown.

The final impact may vary based on the duration of the current social and economic conditions.

To the extent the COVID-19 pandemic continues, it may materially impact our financial condition, liquidity or results of operations in the future.

We do not currently believe the accumulated costs will present a material impact to our financial liquidity or position.

The extent to which the COVID-19 pandemic continues it may materially impact our financial condition, liquidity or results of operations in the future.

Since our inception, we have incurred significant operating losses.

We have generated limited revenue to date from funding arrangements with our collaboration partner.

We have generated limited revenue to date from funding arrangements with our former collaboration partner.

We have not yet commercialized any of our product candidates and we do not expect to generate revenue from sales of any product candidates for several years, if at all.

We have historically funded our operations primarily through the public offering and private placement of our securities and consideration received from our collaborative agreements.

On March 19, 2020, we entered into a Purchase Agreement with LPC, pursuant to which we may elect to sell to LPC up to $25,000,000 in shares of our Common Stock, subject to certain limitations and conditions set forth in the Purchase Agreement.

Pursuant to the Purchase Agreement, we issued 181,595 shares of Common Stock to LPC as a commitment fee.

As of September 30, 2020, 1,061,583 shares have been sold under this Purchase Agreement for proceeds of $10.7 million.

On July 9, 2020, we completed a PIPE and issued 118,638 Series A Preferred Stock to new and existing investors in exchange gross proceeds of $1 04.4 million , or net proceeds of $98.9 million , after deducting commissions and estimated offering costs .

As of September 30, 2020, we had cash and cash equivalents of $129.4 million, which will be sufficient to fund out operating expenses and capital expenditure requirements into 2023.

In 2020, 2,412,870 shares were sold under the LPC Purchase Agreement for proceeds of $25.0 million.

No additional shares may be or have been sold to LPC under the terms of the LPC Purchase Agreement.

On July 9, 2020, we completed a PIPE and issued 118,638 Series A Preferred Stock to new and existing investors in exchange gross proceeds of $104.4 million, or net proceeds of $98.9 million, after deducting commissions and offering costs.

On December 4, 2020, we completed an underwritten public offering of 11,794,872 shares of our common stock at a public offering price of $9.75 per share (including the exercise in full by the underwriters of their 30-day option to purchase up to 1,538,461 additional shares of common stock), or net proceeds from the offering of $107.7 million, after deducting the underwriting discounts and commissions and offering expenses.

As of March 31, 2021, we had cash and cash equivalents of $230.7 million, which we expect will be sufficient to fund our operating expenses and capital expenditure requirements into 2024.

The following table summarizes our sources and uses of cash for each of the periods presented:

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

Cash used in operating activities

Cash provided by investing activities

Cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and

Cash provided by (used in) financing activities

Net decrease in cash, cash equivalents and

restricted cash

Operating Activities

During the nine months ended September 30, 2020, operating activities used $26.5 million of cash, primarily resulting from our net loss of $63.5 million and net cash used by changes in our operating assets and liabilities of $5.9 million, partially offset by net non-cash charges of $42.9 million.

Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2020 consisted primarily of a $4.1 million decrease in accounts payable and accrued expenses and other current liabilities, a $1.3 million decrease in deferred revenue, a $0.4 million decrease in operating lease liabilities, and a $2.8 million increase in prepaid expenses and other current assets, partially offset by $2.0 million decrease in accounts receivable, a $0.2 million decrease in the right-of-use asset and a $0.4 million decrease in other assets.

During the nine months ended September 30, 2019, operating activities used $33.1 million of cash, primarily resulting from our net loss of $34.1 million and from net cash used by changes in our operating assets and liabilities of $2.2 million, partially offset by net non-cash charges of $3.2 million.

Net cash used by changes in our operating assets and liabilities for the nine months ended September 30, 2019 consisted primarily of a $3.2 million decrease in deferred revenue and a $0.9 million decrease in prepaid expenses and other current assets and other assets, partially offset by a $0.8 million increase in accounts receivable and a $1.2 million increase in accounts payable and accrued expenses and other current liabilities.

During the three months ended March 31, 2021, operating activities used $11.4 million of cash, primarily resulting from our net loss of $11.7 million and from net cash used by changes in our operating assets and liabilities of $1.1 million, partially offset by net non-cash charges of $1.4 million.

Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2021 consisted primarily of a $2.4 million decrease in accounts payable and accrued expenses and other current liabilities, and a $0.5 million decrease in operating lease liabilities, partially offset by a $1.4 million decrease in prepaid expenses and other current assets and a $0.5 million decrease in the right-of-use asset.

During the three months ended March 31, 2020, operating activities used $7.9 million of cash, primarily resulting from our net loss of $6.1 million and from net cash used by changes in our operating assets and liabilities of $2.1 million, partially offset by net

non-cash charges of $0.3 million.

Net cash used by changes in our operating assets and liabilities for the three months ended March 31, 2020 consisted primarily of a $3.6 million decrease in accounts payable and accrued expenses and other current liabilities and a $0.5 million decrease in deferred revenue, partially offset by $2.0 million decrease in accounts receivable.

Investing Activities

During the nine months ended September 30, 2020, net cash provided by investing activities of $8.4 million consisted of $8.1 million in proceeds from the disposal of BOXR assets as well as $0.3 million in proceeds from the sale of other property and equipment.

During the nine months ended September 30, 2019, net cash provided by investing activities of $23.2 million consisted of maturities and sales of marketable securities of $23.0 million and $0.2 million in proceeds from the sale of property and equipment offset by purchases of property and equipment of less than $0.1 million.

There were no investing activities for the three months ended March 31, 2021 and 2020, respectively.

Financing Activities

During the nine months ended September 30, 2020, net used in financing activities was $110.1 million which consisted of the proceeds from the issuance of Series A non-voting preferred stock and common stock, from the issuance common stock upon stock option exercises and from the issuance of common stock under the Employee Stock Purchase Plan.

During the nine months ended September 30, 2019, net cash provided by financing activities was $0.1 million from the proceeds from the issuance of common stock upon stock option exercises.

During the three months ended March 31, 2021, net cash used by financing activities was $0.1 million which consisted of the partial settlement of the CVR obligation.

During the three months ended March 31, 2020, net cash provided by financing activities was $0.1 million which consisted of the proceeds from the issuance of common stock upon stock option exercises and from the issuance of common stock under the Employee Stock Purchase Plan.

Funding Requirements

We expect our expenses to increase in connection with our ongoing activities, particularly as we advance clinical development of our product candidates, preclinical activities, and wind-down our legacy clinical trials.

We expect our expenses to increase in connection with our ongoing activities, particularly as we advance clinical development of our product candidates and preclinical activities.

The timing and amount of our operating expenditures will depend largely on:

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the impact of COVID-19 on the operations of key governmental agencies, such as the FDA, which may delay the development of our current product candidates or any future product candidates.

As of September 30, 2020, we had cash and cash equivalents of $129.4 million.

We expect that our current cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023.

We believe that our existing cash and cash equivalents of $230.7 million as of March 31, 2021 will enable us to fund our operating expenses and capital expenditure requirements into 2024.

We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

There is no assurance that we will be successful in obtaining benefits from cost saving measures implemented or planned or in obtaining additional financing on terms acceptable to us, if at all, nor is it considered probable under the accounting standards.

As such, under the requirements of ASC 205-40, management may not consider the potential for future capital raises or management plans to reduce costs that are not considered probable in their assessment of our ability to meet our obligations.

The Company will require additional funding to complete the critical activities planned to support ongoing research and development programs.

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.

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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 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 drug candidates that we would otherwise prefer to develop and market ourselves.

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 drug candidates that we would otherwise prefer to develop and market ourselves.

Critical Accounting Policies and Significant Judgments and Estimates

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We believe that of our critical accounting policies described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K, the following involve the most judgment and complexity:

revenue recognition of collaboration agreements;

accrued research and development expenses;

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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 2. Management’s Discussion and Analysis