Compass Therapeutics, Inc.: Form 10-Q for the period ended Sep 30, 2025

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 three and nine months ended September 30, 2025. 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, 2024, 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. 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 pathways 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.

Our pipeline comprises three clinical product candidates and one candidate in investigational new drug application (“IND”) enabling studies. Our lead product candidate, tovecimig (formerly known as CTX-009), is a bispecific antibody targeting Delta-like ligand 4 (“DLL4”), a ligand of Notch-1, and vascular endothelial growth factor A (“VEGF-A”). Simultaneous blockade of the VEGF-A and the Notch pathways is known to turn productive angiogenesis into non-productive angiogenesis, which leads to tumor shrinkage and apoptosis. CTX-471, is an agonistic antibody targeting a member of the tumor necrosis factor receptor superfamily member 9 (TNFRSF9), also known as CD-137, a co-stimulatory receptor which is mostly expressed on activated, but not on resting, T-cells and NK cells. CTX-8371, is a bispecific antibody targeting the programmed cell death protein-1 (“PD-1”), an inhibitory immune checkpoint receptor and its ligand PD-L1, two validated immune-oncology targets. In addition, we are in the process of IND enabling studies with CTX-10726, a bispecific antibody targeting PD-1 and VEFG-A. For a more detailed description and developments related to our pipeline, see our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 and subsequent Quarterly Reports on Form 10-Q for the three months ended March 31, 2025 and June 30, 2025.

Recent Developments

Data from tovecimig (DLL4 x VEGF-A bispecific) Phase 2/3 study in patients with Biliary Tract Cancer (BTC) expected late Q1 2026

Based on a continuing trend of decreased mortality in the ongoing Phase 2/3 COMPANION-002 study of tovecimig in patients with advanced BTC, the analyses of overall survival (OS) and progression-free survival (PFS) are expected in late Q1 2026.

New response in a third indication observed in the fifth and final dosing cohort of the Phase 1 dose-escalation study of CTX-8371 (PD-1 x PD-L1 bispecific).

The fifth and final dosing level in the Phase 1 dose-escalation study of CTX-8371 has been fully enrolled. A new response was observed in this cohort in a third indication, in addition to previously reported responses in patients with non-small cell lung cancer (NSCLC) and triple-negative breast cancer (TNBC). No dose-limiting toxicities were observed at any dose level, potentially differentiating the safety profile of CTX-8371 from currently approved checkpoint inhibitors. We now expect to present full topline data, including data from this fifth cohort, at a medical meeting in the first half of 2026. We are also planning to initiate cohort expansions in patients with NSCLC and TNBC this quarter, based on the previously disclosed responses.

OPERATING ACTIVITIES

We have funded our operations primarily with proceeds from the sale of our equity securities. Through September 30, 2025, we have received $568 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 $14.3 million and $10.5 million for the three months ended September 30, 2025 and 2024, respectively. Our net losses were $50.8 million and $34.3 million for the nine months ended September 30, 2025 and 2024, respectively. We had an accumulated deficit of $415.5 million on September 30, 2025. 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.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through equity and debt financings, or other capital sources, which may include collaborations with other companies or other strategic transactions. As of September 30, 2025, we had $220 million in cash, cash equivalents and marketable securities. We expect that such cash resources will enable us to fund our operating expenses and capital expenditure requirements into 2028. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, reduce or eliminate the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

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.

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, tovecimig, CTX-471, CTX-8371 and CTX-10726. We expense research and development costs as incurred. These expenses include:

• clinical expenses including Contract Research Organizations (“CRO”), consultants that conduct our clinical trials, as well as investigative sites;
• manufacturing expenses including Contract Manufacturing Organizations (“CMO”), consultants that are primarily engaged to develop and manufacture drug substance and product for our clinical trials, as well as the cost of acquiring and manufacturing clinical trial materials, including manufacturing registration and validation batches;
• employee-related expenses including salaries, related benefits and equity-based compensation expense for employees engaged in research and development functions;
• other research and development expenses including preclinical study costs and expenses incurred under agreements with organizations that support our platform program development;
• 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, business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters, professional fees for accounting, auditing, tax, insurance, administrative travel expenses, selling and marketing costs 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

Other income consists of interest income on marketable securities.

Results of Operations

Comparison of the Three Months Ended September 30, 2025 and 2024

The following table summarizes our results of operations for the three months ended September 30, 2025 and 2024 (in thousands):

Research and Development Expenses

Research and development expenses increased by $4.2 million, or 49%, for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. Research and development expenses related to our new pipeline candidate, CTX-10726, was $4.6 million.

We track outsourced development, personnel costs and other research and development costs of specific programs. Research and development expenses are summarized by program in the table below (in thousands):

15

General and Administrative Expenses

General and administrative expenses decreased by $0.6 million, or 18% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The decrease was primarily driven by a reduction of stock-based compensation expense of $1.3 million from the cancellation of employee equity partially offset by an increase in costs related to market research and commercial preparation costs of $0.6 million.

Other income

Other income decreased by $0.2 million or 11% for the three months ended September 30, 2025 as compared to the same period in 2024. Other income consisted exclusively of interest income, which decreased based on a lower average balance of cash and marketable securities.

Comparison of the Nine months ended September 30, 2025 and 2024

The following table summarizes our results of operations for the nine months ended September 30, 2025 and 2024 (in thousands):

Licensing Revenue

There was no licensing revenue for the nine months ended September 30, 2025. Licensing revenue was $850 thousand for the nine months ended September 30, 2024. The licensing revenue consisted of a $1 million milestone payment from Elpiscience for completing a Phase 1 trial in China. This license revenue is reported net of a 15% sublicense royalty due ABL Bio (see footnote 11 of the financial statements in this Quarterly Report on Form 10-Q for further information on this sublicense agreement).

Research and Development Expenses

Research and development expenses increased by $13 million, or 44%, for the nine months ended September 30, 2025, as compared to the nine months ended September 30, 2024. Manufacturing expenses increased $11.2 million, primarily related to tovecimig and CTX-10726. In addition, IND-enabling costs related to CTX-10726 were $1.9 million.

We track outsourced development, personnel costs and other research and development costs of specific programs. Research and development expenses are summarized by program in the table below (in thousands):

16

General and Administrative Expenses

General and administrative expenses increased $1.0 million, or 8% for the nine months ended September 30, 2025 as compared to the same period in 2024. This increase primarily came from an increase of $0.6 million of market research and commercial preparation costs.

Other income

Other income decreased by $1.6 million or 29% for the nine months ended September 30, 2025 as compared to the same period in 2024. Other income consisted exclusively of interest income which decreased based on a lower average balance of cash and marketable securities.

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. Through September 30, 2025, we have received $568 million in gross proceeds from the sale of equity securities. As of September 30, 2025, we had cash, cash equivalents and marketable securities of $220 million.

Cash Flows

The following table shows a summary of our cash flows for the periods indicated (in thousands):

Operating Activities

During the nine months ended September 30, 2025, we used $35.9 million of cash in operating activities, resulting from our net loss of $50.8 million partially offset by the change in operating assets and liabilities of $7.7 million and non-cash charges of $7.2 million (primarily from share-based compensation expense of $6.5 million).

During the nine months ended September 30, 2024, we used $35.7 million of cash in operating activities, resulting from our net loss of $34.3 million minus the change in operating assets and liabilities of $7.7 million, partially offset by non-cash charges of $6.3 million (primarily from share-based compensation expense of $6.3 million).

Investing Activities

During the nine months ended September 30, 2025, $90.0 million of cash was used in investing activities related to the net purchases of marketable securities. During the nine months ended September 30, 2024, $31.4 million of cash was provided by investing activities, related to the net sale of marketable securities.

Financing Activities

During the nine months ended September 30, 2025, $128.5 million of cash was provided by financing activities due to the issuance of common shares. During the nine months ended September 30, 2024, $17.4 million of cash was provided by financing activities. This primarily included $17.6 million of net cash from sale of common stock under an ATM Agreement, after issuance costs.

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 candidates or any future product candidates we may develop;
• the initiation, progress, timing, costs and results of nonclinical studies for our product candidates or any future product candidates we may develop;
• 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 and validating a manufacturing site for commercial-scale manufacturing; and
• 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.

We believe that our existing cash, cash equivalents and marketable securities as of filing of this Quarterly Report on Form 10-Q will enable us to fund our operating expenses and capital expenditure requirements into 2028. 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. Our current plans, which may change based on clinical or preclinical results, include studies for tovecimig, CTX-471, and CTX-8371 and IND enabling studies for CTX-10726. We expect that we will require additional funding to complete the clinical development of these programs including the payment of developmental milestones, commercializing our product candidates, if we receive regulatory approval, and pursuing in-licenses or acquisitions of other product candidates. If we receive regulatory approval for tovecimig, CTX-471, CTX-8371, CTX-10726 or other product candidates, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution, depending on where we choose to commercialize these product candidates 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.

Management’s Evaluation of Our Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial 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 September 30, 2025. 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 September 30, 2025, our Chief Executive Officer (Principal Executive Officer) and Chief Financial 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 September 30, 2025 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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, 2024, which could materially affect our business, financial condition, or results of operations. There has been no material change in the risk factors described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, with the exception of the addition of the following risk factors:

Adverse global conditions, including economic uncertainty and tariffs, may negatively impact our financial results.

Global conditions, dislocations in the financial markets, or inflation could adversely impact our business. In addition, the global macroeconomic environment has been and may continue to be negatively affected by, among other things, instability in global economic markets, increased U.S. trade tariffs and trade disputes with other countries, instability in the global credit markets, supply chain weaknesses, instability in the geopolitical environment, political tensions, and foreign governmental debt concerns. Such challenges have caused, and may continue to cause, uncertainty and instability in local economies and in global financial markets, which may adversely affect our business.

Executive actions on drug pricing could negatively impact our ability to obtain adequate reimbursement for our products, if and when they are approved.

On April 15, 2025, the Trump Administration published Executive Order 14273, “Lowering Drug Prices by Once Again Putting Americans First,” which generally directs the federal government to take measures to reduce drug prices, including eliminating the so-called “pill penalty” under the Inflation Reduction Act that creates a distinction between small molecule and large molecule products for purposes of determining when a drug may be eligible for drug price negotiation. On May 12, 2025, the Trump Administration published Executive Order 14297, “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients” which generally, among other things, directs the federal government to establish and communicate most-favored-nation price targets to pharmaceutical manufacturers to bring prices for American patients in line with comparably developed nations. Further, the Executive Order directs the federal government to support regulatory paths to allow direct-to-patient sales for companies that meet these targets. It also states that the Administration will take additional aggressive action (for example, examining whether marketing approvals should be modified or rescinded or opening the door for individual drug importation waivers) should manufacturers fail to offer American consumers the most-favored-nation lowest price. It also directs the Secretary of Commerce and the U.S. Trade Representative to “take all necessary and appropriate action to ensure foreign countries are not engaged in any act, policy, or practice that may be unreasonable or discriminatory or that may impair United States national security . . . including by suppressing the price of pharmaceutical products below fair market value in foreign countries.” Notably, a similar “Most Favored Nation” pricing rule enacted under the first Trump Administration was subject to an injunction resulting from judicial challenges to the rule, which was formally rescinded by the former Biden Administration in August 2021. For more information, see the section titled, “Business - Government Regulation - Current and future healthcare reform legislation” in our Annual Report on Form 10-K.