# Compass Therapeutics, Inc.: Form 10-Q for the period ended Mar 31, 2022

- Company: [Compass Therapeutics, Inc.](/companies/cmpx.md) (CIK 1738021)
- Form: 10-Q
- Filed: 2022-05-09
- Accepted by EDGAR: May 9, 2022, 11:58 ET
- Period: 2022-03-31
- Accession: 0000950170-22-008244
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1738021/000095017022008244/cmpx-20220331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1738021/000095017022008244/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2022-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Operating income | 3 months, 2022-01-01 to 2022-03-31 | −$7.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:InterestExpense |
| Income tax | 3 months, 2022-01-01 to 2022-03-31 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2022-01-01 to 2022-03-31 | −$7.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2022-01-01 to 2022-03-31 | −$0.07 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 3 months, 2022-01-01 to 2022-03-31 | −$7.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2022-01-01 to 2022-03-31 | $194.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2022-03-31 | $136.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2022-03-31 | $140.3m | us-gaap:AssetsCurrent |
| Total assets | at 2022-03-31 | $146.6m | us-gaap:Assets |
| Current liabilities | at 2022-03-31 | $9.3m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2022-03-31 | $12.1m | us-gaap:Liabilities |
| Shareholders' equity | at 2022-03-31 | $134.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 39,233 characters.

*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 March 31, 2022. Some of the information contained in this discussion and analysis, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk, uncertainties and assumptions. You should read the “Risk Factors” section of this Quarterly Report on Form 10-Q and the “Risk Factors” section included in our* Annual Report on Form 10-K for the fiscal year ended December 31, 2021*, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.*

### Overview

We are a clinical-stage, oncology-focused biopharmaceutical company developing proprietary antibody-based therapeutics to treat multiple human diseases. Our scientific focus is on the relationship between angiogenesis, the immune system, and tumor growth. Our pipeline of novel product candidates is designed to target multiple critical biological pathways required for an effective anti-tumor response. These include modulation of the microvasculature via angiogenesis-targeted agents, induction of a potent immune response via activators on effector cells in the tumor microenvironment, and alleviation of immunosuppressive mechanisms used by tumors to evade immune surveillance. We plan to advance our product candidates through clinical development as both standalone therapies and in combination with proprietary pipeline antibodies based on supportive clinical and nonclinical data.

On June 25, 2021, 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, including a $5 million earnout which is dependent on biologics license application approval of a product candidate acquired in the transaction, renamed CTX-009. As part of this $9 million in earnout payments to the TRIGR shareholders, $2 million represented a milestone payment that was remitted to TRIGR shareholders in the fourth quarter of 2021, with up to $7 million of eligible earnout payments remaining.

We currently have two product candidates in the clinical stage of development: CTX-009 and CTX-471. In addition, a third product candidate, CTX-8371, is expected to enter the clinic in the first 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.

### CTX-009 (a.k.a. ABL001) - bispecific antibody targeting DLL4 and VEGF-A

CTX-009 is an investigational bispecific antibody that simultaneously blocks Delta-like ligand 4/Notch ("DLL4") and vascular endothelial growth factor A ("VEGF-A") signaling pathways, which are critical to angiogenesis and tumor vascularization. We have licensed exclusive global rights to CTX-009, outside of South Korea, from ABL Bio, Inc. (“ABL Bio”), a South Korea-based clinical-stage company focused on developing antibody therapeutics. South Korean rights are held by Handok Pharmaceuticals, Inc. (“Handok”) and China rights were out-licensed from the Company to Elpiscience Biopharmaceuticals Co., Limited (“Elpiscience”).

CTX-009 is undergoing clinical development in patients with advanced solid tumors. A Phase 1 dose escalation and dose expansion monotherapy study and a Phase 1b combination study of CTX-009 in combination with chemotherapy have been completed. In the first quarter of 2021, Handok commenced a Phase 2 study of CTX-009 in combination with paclitaxel in patients with biliary tract cancers (“BTC” or “cholangiocarcinoma”) in South Korea. The study has been enrolling patients with unresectable advanced, metastatic, or relapsed BTCs who have received one or two prior systemic therapies. This Phase 2 study has a Simon Two-Stage design where 3 partial responses ("PRs") among the first 21 patients enrolled in the first stage of the study will advance the study to the second stage. As of October 2021, there were five PRs observed among the first 17 evaluable patients (see current status under

Q1 Program Updates below), and therefore, the criteria to advance the study to its second stage was met. The study is currently being conducted at four leading medical centers in South Korea.

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, enabling the Company to initiate a global Phase 2 clinical trial for CTX-009 in combination with paclitaxel in patients with advanced BTC in the United States and South Korea. Therefore, patients who were already enrolled in the study in South Korea, and additional patients who will be enrolled in the United States as well as South Korea, will all be included in this global Phase 2 clinical trial.

We plan on opening clinical sites in the United States in the second quarter of 2022 and initiating dosing of patients in these sites in the third quarter of 2022.

### Q1 PROGRAM UPDATES

### CTX-009 - bispecific antibody targeting DLL4 and VEGF-A

The Company reported the following interim data from its Phase 2 clinical trial of CTX-009 in combination with Paclitaxel in BTC on May 4, 2022. The press release and presentation were included with our current report 8-K filed on May 4, 2022.

### 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, 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 leading to a clinical benefit rate ("CBR") of 92%. The current median time on study is approximately 6 months.

The interim waterfall plot below depicts the best response for 22 patients in the study as of April 14, 2022:

The swimmer plot below depicts the duration that each patient has been on treatment:

### 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 AE related to CTX-009 and/or paclitaxel. The most common adverse events (all Grades) occurring in at least 3 patients were anemia (12.5%), asthenia (25.0%), fatigue (16.7%), edema (16.7%), pyrexia (16.7%), neutropenia (54.2%), thrombocytopenia (20.8%), headache (16.7%), proteinuria (20.8%), dysphonia (12.5%), dyspnea (25.0%), epistaxis (33.3%), pulmonary hypertension (16.7%, all Grade 1) and hypertension (50.0%).

Grade 3 or greater Adverse Events (“AEs”) that were determined to be probably or possibly related to CTX-009 and paclitaxel treatment included neutropenia (n=12; 50.0%), hypertension (n=4; 16.7%), anemia (n=3; 12.5%) and thrombocytopenia (n=2; 8.3%), which were all 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.

### Development Plans 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 that supports the potential therapeutic benefit of CTX-009. We chose BTC as our lead indication due to a number of factors, including CTX-009 activity observed in the Phase 1b and in the ongoing Phase 2 clinical studies, lack of effective therapies for this patient population, and the potential for a straight-forward regulatory route to approval.

We plan to advance CTX-009 into a Phase 2/3 study in the second line setting in the general BTC patient population with ORR and duration of response (“DOR”) as potential endpoints for accelerated approval, with the goal of filing a biologics license application ("BLA") in 2024. This goal is based on recent approvals of pemigatinib and infigratinib in cholangiocarcinoma patients who harbor the FGFR2 mutation (estimated to be 10-15% of the total BTC patient population - see study from Goyal, L. et al, Targeting FGFR inhibition in cholangiocarcinoma, Cancer Treatment Review, Vol. 95, Apr 2021), the response rate observed with CTX-009 in the general BTC patient population in the Phase 1b and the preliminary response rate observed in the Phase 2 combination trials summarized above.

The second indication we plan on pursuing is advanced colorectal cancer. Colorectal cancer patients who advance on front line therapy have very limited therapeutic options, and this patient population is significant in size and could be well-served by novel and effective therapies. Accordingly, we plan on initiating a Phase 2/3 monotherapy clinical trial of CTX-009 in the third line setting in colorectal cancer. Taking into consideration the activity of regorafenib, which was recently approved in the third line setting in colorectal cancer, and the activity seen with the small molecule KRAS G12C inhibitors, sotorasib and adagrasib in colorectal patients harboring the G12C mutation, and the response rates observed with CTX-009 in the Phase 1a monotherapy trial in colorectal cancer patients, we believe that we can advance CTX-009 into a Phase 2/3 study in the third line setting in colorectal cancer with ORR and DOR as potential endpoints for accelerated approval. We have not yet discussed this plan with regulatory agencies, including the FDA.

The timing of the initiation of the 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. These plans remain preliminary and are subject to feedback from regulatory agencies. While our IND has been cleared for CTX-009 in patients with advanced BTC and we had initial communications with the FDA, we have not yet discussed with the FDA or other regulatory agencies the proposed design of the colorectal trial or other potential studies or the regulatory path for BLA submission 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 studies providing hints of activity of CTX-009 in additional indications such as gastric cancer, pancreatic cancer, renal cell cancer, prostate cancer and ovarian cancer.

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

### CTX-471 - monoclonal antibody agonist of CD137

CTX-471, our monoclonal antibody product candidate, is a fully human, IgG4 monoclonal antibody that is an agonist of CD137, a key co-stimulatory receptor on immune cells. Binding of CTX-471 to CD137 has been observed to lead to ligand-stimulated activation of T-cells and NK cells. In tumor models, treatment with CTX-471 as a monotherapy led to recruitment and activation of immune cells in the tumor microenvironment. In the treated mice, dosing with CTX-471 led to extensive reprogramming of the tumor microenvironment, including increased recruitment of immune cells, reversion of exhausted cytotoxic CD8+ T-cells, reductions in immunosuppressive regulatory T-cells, and reductions in immunosuppressive tumor- 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 dose-escalation stage of the Phase 1a 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 February 25, 2022, 49 patients with 15 different cancers have been enrolled in the study and 38 of those patients are evaluable. Of the 38 evaluable patients, 3 patients had a PR; the first two have been confirmed by RECIST 1.1 and the third PR is unconfirmed. In addition, 19 patients have reached stable disease, leading to a preliminary ORR of 8% and a CBR of 58%. There has been one treatment-related serious adverse event (“SAE”) in the Phase 1b dose expansion stage of the trial. This 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).

The first PR observed in the study was in a patient with advanced small cell lung cancer who had a PR at week 17 and this response has been confirmed at week 25. This patient has now been dosed with CTX-471 for more than one year with a durable PR. In October 2021, a second PR was observed in a patient with metastatic melanoma who was previously treated with nivolumab and progressed on nivolumab. In December 2021, a third PR was observed in a patient with metastatic melanoma of mucosal origin who was previously treated with first-line regimen of ipilimumab plus nivolumab followed by second-line nivolumab as a monotherapy. After progressing on the prior regimens, the patient had joined CTX-471 study with multiple metastases at baseline. This patient reached a PR based on a 58% decline in linear tumor burden at week 17. This PR was not confirmed.

We expect to complete the dose expansion stage of our Phase 1 study in the third quarter of 2022. The results of this study will inform us on the next development steps. There are three studies that are currently been contemplated, and the decision which one(s) to pursue will be informed by the data of our clinical study. The first is a combination study with a PD-1/PD-L1 inhibitor in indications where PD-1 and/or PD-L1 alone are not currently approved. The second is as maintenance treatment for small cell lung cancer. The third is as a monotherapy in the post PD-1/PD-L1 patient population as a salvage therapy across multiple indications.

### CTX-8371 - bispecific antibody that targets 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 are generally progressing well. 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 GMP manufacturing of CTX-8371. In March 2022, the GMP manufacturing campaign started. Based on the timeline provided by Fujifilm for the GMP manufacturing campaign, we are currently targeting an IND submission for CTX-8371 in the first quarter of 2023.

### Q1 PROGRAM UPDATE: CTX-8371

In April 2022, the Company presented preclinical data on CTX-8371 involving a unique mechanism of action ("MOA") that involves cleavage of cell surface PD-1, at the 2022 American Association for Cancer Research ("AACR") annual meeting. A summary of the results is as follows:

- Treatment with CTX-8371 leads to PD-1 loss from the surface of intra-tumoral T cells in tumor-bearing transgenic hPD-1/h-PD-L1 mice, and on peripheral blood T cells in cynomolgus monkeys. This unique MOA differentiates CTX-8371 from marketed inhibitors targeting either PD-1 or PD-L1.
- Clearance and half-life of CTX-8371 are within the expected ranges for a human IgG1 antibody in non-human primates (NHP) with a linear pharmacokinetics ("PK").
- Treatment with CTX-8371 in the aggressive MC38-hPD-L1 colorectal mouse model led to a dose-proportional reduction in tumor volume and a complete eradication of tumors at the highest dose.
- Taken together, the murine and cynomolgus monkey PK data, receptor occupancy data, and in vivo efficacy data in murine models will be used to calculate the predicted human efficacious dose range for CTX-8371.

### Operating Activities

We have funded our operations primarily with proceeds from the sale of our equity securities. Through March 31, 2022, we have received $329.0 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 $7.2 million and $7.4 million for the three months ended March 31, 2022 and 2021, respectively. We had an accumulated deficit of $241 million at March 31, 2022. We expect to continue to incur significant expenses for at least the next several years as we advance through clinical development, develop additional product candidates and seek regulatory approval of any product candidates that complete clinical development. In addition, if we obtain marketing approval for any product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. We may also incur expenses in connection with the in-licensing or acquisition of additional product candidates.

Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity and debt financings, or other capital sources, which may include collaborations with other companies or other strategic transactions. As of March 31, 2022, we had $136 million in cash and cash equivalents. With the proceeds from the underwritten offering in November 2021, and 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 the second half of 2024.

Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.

### COVID-19 Update

We have been carefully monitoring the COVID-19 pandemic and its potential impact on our business and have taken important steps to help ensure the safety of our employees and to reduce the spread of COVID-19 community-wide. We are ensuring that essential staffing levels at our operations remain in place, including maintaining key personnel in our laboratory facilities. We have implemented stringent safety measures designed to create a safe and clean environment for our employees as we continue to comply with applicable federal, state and local guidelines instituted in response to the COVID-19 pandemic.

There have been delays in sourcing of selected supplies required for the manufacturing of material to be used in our future clinical trials, and these delays have impacted and may continue to impact the timing of our future clinical trials. We expect that COVID-19 may continue to directly or indirectly impact (i) our employees and business operations or personnel at third-party suppliers and other vendors in the U.S. and other countries; (ii) the availability, cost or supply of materials; and (iii) the timeline for our ongoing clinical trial and potential future trials. We are continuing to assess the potential impact of the COVID-19 pandemic on our current and future business and operations, including our expenses and clinical trials, as well as on our industry and the healthcare system.

### Components of Results of Operations

### Research and Development

Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates, CTX-471, CTX-8371 and CTX-009, as well as unrelated discovery program expenses. We expense research and development costs as incurred. These expenses include:

- employee-related expenses including salaries, related benefits and equity-based compensation expense for employees engaged in research and development functions;
- expenses incurred under agreements with organizations that support our platform program development;
- Contract Manufacturing Organizations (“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;
- costs related to compliance with quality and regulatory requirements; and
- facilities and equipment expenses.

Advance payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such amounts are recognized as an expense as the goods are delivered or the related services are performed, or until it is no longer expected that the goods will be delivered or the services rendered.

Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will increase substantially in connection with our planned clinical development activities in the future. At this time, we cannot accurately estimate or know the nature, timing and costs of the efforts that will be necessary to complete the clinical development of any future product candidates.

The successful development and commercialization of product candidates is highly uncertain. This is due to the numerous risks and uncertainties associated with product development and commercialization.

### General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, corporate and business development, and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; insurance costs; administrative travel expenses; marketing expenses and other operating costs.

We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our business operations.

### Other Income (expense)

Other income (expense) consists of interest expense, interest income and realized gains or losses on sales of furniture and equipment.

### Results of Operations

### Comparison of the Three Months Ended March 31, 2022 and 2021

The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021:

| Operating expenses: | Three Months Ended March 31, 2022 | 2021 (000’s) | Change |
| --- | ---: | ---: | ---: |
| Research and development | $4,415 | $4,704 | $(289) |
| General and administrative | 2,767 | 2,635 | 132 |
| Total operating expenses | 7,182 | 7,339 | (157) |
| Loss from operations | (7,182) | (7,339) | 157 |
| Other income (expense), net | 20 | (83) | 103 |
| Loss before income tax expense | (7,162) | (7,422) | 260 |
| Income tax expense | — | — | — |
| Net loss | $(7,162) | $(7,422) | $260 |

#### Research and Development Expenses

Research and development expenses decreased by $0.3 million, or 6%, for the three months ended March 31, 2022 compared to the three months ended March 31, 2021. The decrease primarily came from a reduction in manufacturing expense of $0.3 million as compared to the same period in 2021.

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:

|  | Three Months Ended March 31, 2022 (000’s) | 2021 |
| --- | ---: | ---: |
| CTX-009 | $576 | $— |
| CTX-471 | 1,296 | 998 |
| CTX-8371 | 922 | 1,494 |
| NKP30 cell engagement platform | — | 117 |
| Unallocated research and development expenses | 1,621 | 2,095 |
| Total research and development expenses | $4,415 | $4,704 |

#### General and Administrative Expenses

General and administrative expenses increased by $0.1 million, or 5%, to $2.8 million for the three months ended March 31, 2022 as compared to the same period in 2021.

#### Other Income (Expense)

For the three months ended March 31, 2022, other income (expense) consists exclusively of interest income. For the three months ended March 31, 2021, the primary component was interest expense of $142 thousand 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 March 31, 2022 and 2021, we recognized no income tax expense.

### Liquidity and Capital Resources

Since our inception, we have devoted substantially all of our efforts to organizing and staffing our Company, business planning, raising capital, research and development activities, building our intellectual property portfolio and providing general and administrative support for these operations. We have funded our operations primarily with proceeds from the sale of our equity securities (in addition, we received borrowings from the Credit Facility, which was extinguished in the fourth quarter of 2021). Through March 31, 2022, we have received $329.0 million in gross proceeds from the sale of equity securities. As of March 31, 2022, we had cash and cash equivalents of $136 million.

### Funding Requirements

Our primary use of cash is to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable, accrued expenses and prepaid expenses. Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

- the scope, timing, progress and results of discovery, preclinical development, laboratory testing and clinical trials for our product candidates;
- the costs of manufacturing our product candidates for clinical trials and in preparation for marketing approval and commercialization;
- the extent to which we enter into collaborations or other arrangements with additional third parties in order to further develop our product candidates;
- the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
- the costs and fees associated with the discovery, acquisition or in-license of additional product candidates or technologies;
- our ability to establish additional collaborations on favorable terms, if at all;
- the costs required to scale up our clinical, regulatory and manufacturing capabilities;
- the costs of future commercialization activities, if any, including establishing sales, marketing, manufacturing and distribution capabilities, for any of our product candidates for which we receive marketing approval; and
- revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our operations through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, current stockholders’ interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or 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 product candidates that we would otherwise prefer to develop and market ourselves.

### Cash Flows

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

|  | Three months Ended March 31, 2022 (000’s) | 2021 |
| --- | ---: | ---: |
| Cash used in operating activities | $(7,942) | $(5,605) |
| Cash used in investing activities | (193) | (13) |
| Cash used in financing activities | — | (1,875) |
| Net change in cash, cash equivalents and restricted cash | $(8,135) | $(7,493) |

### Operating Activities

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, offset by non-cash charges of $2.0 million and the change in operating assets and liabilities of $2.8 million. Our non-cash charges are from share-based compensation expense of $1.6 million and depreciation and amortization (including ROU asset amortization) of $0.4 million.

During the three months ended March 31, 2021, we used $5.6 million of cash in operating activities, resulting from our net loss of $7.4 million, offset by non‑cash charges of $1.3 million and the change in operating assets and liabilities of $0.5 million. Our non‑cash charges were primarily comprised of depreciation and amortization of $0.2 million, share-based compensation expense of $0.9 million, offset by $44 thousand of gain on disposal of equipment.

### Investing Activities

During the three months ended March 31, 2022, we used $0.2 million of cash in investing activities which primarily related to leasehold improvements. During the three months ended March 31, 2021, we used $13 thousand of cash in investing activities.

### Financing Activities

We had no financing activities during the three months ended March 31, 2022. During the three months ended March 31, 2021, we had $1.9 million in payments under the Credit Facility.

### Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing activities. The timing and amount of our operating expenditures will depend largely on:

- the initiation, progress, timing, costs and results of clinical trials for our product candidate 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;
- our ability to maintain our relationships with key collaborators;
- the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities, including the potential for such authorities to require that we perform more nonclinical studies or clinical trials than those that we currently expect or change their requirements on studies that had previously been agreed to;
- the cost to establish, maintain, expand, enforce and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, defending and enforcing any patents or other intellectual property rights;
- the effect of competing technological and market developments;
- the costs of continuing to grow our business, including hiring key personnel and maintain or acquiring operating space;
- market acceptance of any approved product candidates, including product pricing, as well as product coverage and the adequacy of reimbursement by third-party payors;
- the cost of acquiring, licensing or investing in additional businesses, products, product candidates and technologies;
- the cost and timing of selecting, auditing and potentially 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; and
- our need to implement additional internal systems and infrastructure, including financial and reporting systems.

We believe that our existing cash and cash equivalents as of filing of the form 10-Q will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2024 based on our current plans, which may change based on clinical or pre-clinical results. These plans include: initiation of two Phase 2 clinical trials of CTX-009, completion of Phase 1 clinical trial of CTX-471, initiation of a Phase 1b combination trial for CTX-471 and commencement 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 ourselves.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interest may be materially diluted, and the terms of such securities could include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing and preferred equity financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specified actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

## Controls and procedures

As filed, 1,339 characters.

### Management’s Evaluation of our Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Operating Officer (Principal Financial Officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2022. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and Chief Operating Officer (Principal Financial Officer) concluded that, as of such date, our disclosure controls and procedures were effective.

### Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, that occurred during the quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 323 characters.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, Item 1A “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which could materially affect our business, financial condition, or results of operations.

Filed May 9, 2022.
Source: SEC EDGAR, the filing index for accession 0000950170-22-008244. Last ingested by Listed: Oct 24, 2026, 15:07 ET. No prices; not investment advice.