10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

 

FORM 10-Q

 

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission File Number: 001-39696

 

 

COMPASS THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-4876496

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

80 Guest St., Suite 601

Boston, Massachusetts

02135

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (617) 500-8099

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

 

CMPX

 

NASDAQ Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 6, 2022, the registrant had 101,283,924 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Consolidated Balance Sheets (Unaudited)

1

 

Condensed Consolidated Statements of Operations (Unaudited)

2

 

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

3

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

4

 

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

24

Item 4.

Controls and Procedures

24

PART II.

OTHER INFORMATION

25

Item 1.

Legal Proceedings

25

Item 1A.

Risk Factors

25

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

26

Item 3.

Defaults Upon Senior Securities

26

Item 4.

Mine Safety Disclosures

26

Item 5.

Other Information

26

Item 6.

Exhibits

26

Signatures

27

 

 

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Compass Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except par value)

 

 

 

 

March 31,
2022 (unaudited)

 

 

December 31,
2021 (Note 1)

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

136,379

 

 

$

144,514

 

Prepaid expenses and other current assets

 

 

3,904

 

 

 

2,591

 

Total current assets

 

 

140,283

 

 

 

147,105

 

Property and equipment, net

 

 

2,142

 

 

 

2,243

 

Operating lease, right-of-use ("ROU") asset

 

 

3,819

 

 

 

4,089

 

Other assets

 

 

320

 

 

 

320

 

Total assets

 

$

146,564

 

 

$

153,757

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

257

 

 

$

867

 

Accrued expenses

 

 

8,050

 

 

 

8,775

 

Operating lease obligations, current portion

 

 

1,027

 

 

 

989

 

Total current liabilities

 

 

9,334

 

 

 

10,631

 

Operating lease obligations, long-term portion

 

 

2,740

 

 

 

3,048

 

Total liabilities

 

 

12,074

 

 

 

13,679

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 10,000 shares authorized and no shares issued and outstanding as of March 31, 2022 and December 31, 2021

 

 

 

 

 

 

Common stock, $0.0001 par value: 300,000 shares authorized; 101,286 and 101,303 shares issued at March 31, 2022 and December 31, 2021, respectively; 100,905 and 100,832 shares outstanding at March 31, 2022 and December 31, 2021, respectively

 

 

10

 

 

 

10

 

Additional paid-in-capital

 

 

375,231

 

 

 

373,657

 

Accumulated deficit

 

 

(240,751

)

 

 

(233,589

)

Total stockholders' equity

 

 

134,490

 

 

 

140,078

 

Total liabilities and stockholders' equity

 

$

146,564

 

 

$

153,757

 

 

 

 

 

 

 

 

 

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

1


 

Compass Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share data)

 

 

 

Three Months Ended
March 31,

 

 

 

2022

 

 

2021

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

4,415

 

 

$

4,704

 

General and administrative

 

 

2,767

 

 

 

2,635

 

Total operating expenses

 

 

7,182

 

 

 

7,339

 

Loss from operations

 

 

(7,182

)

 

 

(7,339

)

Other income (expense)

 

 

20

 

 

 

(83

)

Loss before income tax expense

 

 

(7,162

)

 

 

(7,422

)

Income tax expense

 

 

 

 

 

 

Net loss

 

$

(7,162

)

 

$

(7,422

)

Net loss per share - basic and diluted

 

$

(0.07

)

 

$

(0.14

)

Basic and diluted weighted average shares outstanding

 

 

100,858

 

 

 

51,313

 

 

 

 

 

 

 

 

 

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

2


 

Compass Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In thousands)

 

Common Units

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

100,832

 

 

$

10

 

 

$

373,657

 

 

$

(233,589

)

 

$

140,078

 

Vesting of share-based awards

 

73

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

1,574

 

 

 

 

 

 

1,574

 

Net loss

 

 

 

 

 

 

 

 

 

 

(7,162

)

 

 

(7,162

)

Balance at March 31, 2022

 

100,905

 

 

$

10

 

 

$

375,231

 

 

$

(240,751

)

 

$

134,490

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated

 

 

Total
Stockholders'

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

51,221

 

 

$

5

 

 

$

191,348

 

 

$

(151,408

)

 

$

39,945

 

Vesting of share-based awards

 

92

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

948

 

 

 

 

 

 

948

 

Net loss

 

 

 

 

 

 

 

 

 

 

(7,422

)

 

 

(7,422

)

Balance at March 31, 2021

 

51,313

 

 

$

5

 

 

$

192,296

 

 

$

(158,830

)

 

$

33,471

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

3


 

Compass Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

 

 

For the Three Months
Ended March 31,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(7,162

)

 

$

(7,422

)

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

 

 

 

 

 

 

Depreciation and amortization

 

 

165

 

 

 

157

 

Gain on disposal of equipment

 

 

 

 

 

(44

)

Noncash interest expense

 

 

 

 

 

15

 

Share-based compensation

 

 

1,574

 

 

 

948

 

ROU asset amortization

 

 

270

 

 

 

256

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(1,313

)

 

 

1,173

 

Accounts payable

 

 

(611

)

 

 

 

Accrued expenses

 

 

(595

)

 

 

(442

)

Operating lease liability

 

 

(270

)

 

 

(246

)

Net cash used in operating activities

 

 

(7,942

)

 

 

(5,605

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(194

)

 

 

(128

)

Proceeds from sale of equipment

 

 

1

 

 

 

115

 

Net cash used in investing activities

 

 

(193

)

 

 

(13

)

Cash flows from financing activities:

 

 

 

 

 

 

Repayment of borrowings under loan

 

 

 

 

 

(1,875

)

Net cash used in financing activities

 

 

 

 

 

(1,875

)

Net change in cash, cash equivalents and restricted cash

 

 

(8,135

)

 

 

(7,493

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

144,514

 

 

 

47,339

 

Cash, cash equivalents and restricted cash at end of period

 

$

136,379

 

 

$

39,846

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

Cash paid for interest

 

$

 

 

$

137

 

Acquisition of equipment included in accrued expenses

 

$

57

 

 

$

161

 

ROU asset acquired through operating leases

 

$

 

 

$

5,148

 

 

 

 

 

 

 

 

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

 

4


 

Compass Therapeutics, Inc. and Subsidiaries

Notes to Unaudited Condensed Consolidated Financial Statements

 

1. Nature of Business and Basis of Presentation

Compass Therapeutics, Inc. (“Compass” or the “Company”) is 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 and the immune system. Our pipeline includes novel product candidates that leverage our understanding of the tumor microenvironment, including both angiogenesis-targeted agents and immune-oncology focused agents. These product candidates are designed to optimize critical components required for an effective anti-tumor response to cancer. 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 our proprietary drug candidates as long as their continued development is supported by clinical and nonclinical data. References to Compass or the Company herein include Compass Therapeutics, Inc. and its wholly-owned subsidiaries. The Company was incorporated as Olivia Ventures, Inc. (“Olivia”) in the State of Delaware on March 20, 2018. Prior to the Company’s reverse merger with Compass Therapeutics LLC (the “Merger”), Olivia was a “shell company” (as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended).

The Company is subject to risks and uncertainties common to companies in the biotechnology and pharmaceutical industries. There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s technology will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees and consultants.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of March 31, 2022 and its results of operations and changes in stockholders’ equity for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The unaudited condensed consolidated financial statements include the accounts of Compass Therapeutics, Inc. and its subsidiaries, and have been prepared by the Company in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet at December 31, 2021 has been derived from the audited consolidated financial statements at that date, but does not include all of the information and footnotes required by GAAP for complete financial statements. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (the “Annual Report”).

Liquidity

Since our inception, we have devoted substantially all of our efforts to organizing and staffing our Company, business planning, raising capital, research and development activities, building our intellectual property portfolio and providing general and administrative support for these operations. To date, we have funded our operations primarily with proceeds from the sale of our equity securities and borrowings from debt arrangements. Through 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 $136.4 million. Based on our research and development plans, we expect that such cash resources will enable us to fund our operating expenses and capital expenditure requirements into the second half of 2024.

 

5


 

 

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.

2. Summary of Significant Accounting Policies

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

Recently Adopted Accounting Pronouncements

The Company adopted ASU 2019-12, Simplifying the Accounting for Income Taxes on January 1, 2022. The Company accounts for income taxes pursuant to FASB ASC Topic 740, Income Taxes. Under FASB ASC Topic 740, deferred tax assets and liabilities are determined based on temporary differences between the bases of certain assets and liabilities for income tax and financial reporting purposes. The deferred tax assets and liabilities are classified according to the financial statement classification of the assets and liabilities generating the differences. The Company maintains a valuation allowance with respect to deferred tax assets. The Company establishes a valuation allowance based upon the potential likelihood of realizing the deferred tax asset and taking into consideration the Company’s financial position and results of operations for the current period. Future realization of the deferred tax benefit depends on the existence of sufficient taxable income within the carry-forward period under the federal tax laws. The adoption of ASU 2019-12 did not have any impact on the Company’s consolidated financial statement presentation or disclosures.

 

6


 

3. Fair Value Measurements

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

 

 

Fair Value Measurements as of March 31, 2022 Using:

 

 

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

 

 

Significant Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

$

130,024

 

 

$

 

 

$

 

 

$

130,024

 

Total assets

$

130,024

 

 

$

 

 

$

 

 

$

130,024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements as of December 31, 2021 Using:

 

 

Quoted Prices in
Active Markets for
Identical Assets
(Level 1)

 

 

Significant Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents - money market funds

$

130,005

 

 

$

 

 

$

 

 

$

130,005

 

Total assets

$

130,005

 

 

$

 

 

$

 

 

$

130,005

 

 

4. Property and Equipment

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

 

 

 

March 31,
2022

 

 

December 31,
2021

 

Equipment

 

$

5,345

 

 

$

5,351

 

Furniture and fixtures

 

 

22

 

 

 

22

 

Leasehold improvements

 

 

1,586

 

 

 

1,531

 

Software

 

 

365

 

 

 

365

 

Total property and equipment–at cost

 

 

7,318

 

 

 

7,269

 

Less: Accumulated depreciation

 

 

(5,176

)

 

 

(5,026

)

Property and equipment, net

 

$

2,142

 

 

$

2,243

 

 

Depreciation expense for each of three months ended March 31, 2022 and 2021 was $0.2 million.

5. Accrued Expenses

Accrued expenses consist of the following (in thousands):

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Compensation and benefits

 

$

490

 

 

$

1,601

 

Project expenses

 

 

1,465

 

 

 

704

 

Accrued milestone

 

 

6,000

 

 

 

6,000

 

Other

 

 

95

 

 

 

470

 

Total accrued expenses

 

$

8,050

 

 

$

8,775

 

 

 

7


 

6. Commitments and Contingencies

 

Leases

The Company adopted Accounting Standards Update 2016-02, Leases (Topic 842), or ASU 2016-02, effective January 1, 2021, using the modified retrospective transition method, in which the new standard is applied as of the date of initial adoption. The Company recognized and measured agreements executed prior to the date of initial adoption that were considered leases on January 1, 2021. No cumulative effect adjustment of initially applying the standard to the opening balance of retained earnings was made upon adoption. The Company elected the package of practical expedients permitted under the transition guidance that will retain the lease classification and initial direct costs for any leases that exist prior to adoption of the standard. In addition, the Company elected the accounting policy of not recording short-term leases with a lease term at the commencement date of 12 months or less on the condensed consolidated balance sheet as permitted by the new standard.

The Company has evaluated its leases and determined that it has one lease that is classified as an operating lease. The classification of this lease is consistent with the Company’s determination under the previous accounting standard.

When available, the Company will use the rate implicit in the lease to discount lease payments to present value; however, the Company’s current lease does not provide an implicit rate. Therefore, the Company used its incremental borrowing rate to discount the lease payments based on the date of the lease commencement.

The Company has one operating lease for its corporate office and laboratory facility (“Facility”) that was signed in December 2020. The Company moved into the Facility in January 2021. The Facility lease has an initial term of four years and five months, beginning on January 1, 2021. The Facility lease contains scheduled rent increases over the lease term. The discount rate used for the Facility lease is 6.25%, and the remaining lease term of the Facility lease is three years and two months as of March 31, 2022.

The table below presents the undiscounted cash flows for the lease term. The undiscounted cash flows are reconciled to the operating lease liabilities recorded on the condensed consolidated balance sheet (000's):

 

 

 

 

 

Remainder of 2022

 

$

875

 

Years ending December 31,

 

 

 

2023

 

 

1,345

 

2024

 

 

1,379

 

2025

 

 

543

 

Total minimum lease payments

 

 

4,142

 

Less: amount of lease payments representing interest

 

 

(375

)

Present value of future minimum lease payments

 

 

3,767

 

Less: operating lease obligations, current portion

 

 

(1,027

)

Operating lease obligations, long-term portion

 

$

2,740

 

 

Milestone payments



As part of the ABL Bio Agreement, the Company is obligated to pay certain development milestone payments. In the fourth quarter of 2021, the Company was notified of the completion of Phase 1 of the clinical trial for CTX-009. As a result, the Company is obligated to pay a $
6.0 million milestone payment to ABL Bio on the deliverance of the final report related to the clinical trial. See Note 10 for additional information on the ABL Bio Agreement.

 

8


 

7. Stock-Based Compensation

Stock-based compensation expense for the three months ended March 31, 2022 and 2021 was classified in the condensed consolidated statement of operations as follows:

 

 

 

Three Months Ended March 31,

 

 

 

2022

 

 

2021

 

 

 

(000’s)

 

Research and development

 

$

375

 

 

$

139

 

General and administrative

 

 

1,199

 

 

 

809

 

Total

 

$

1,574

 

 

$

948

 

As of March 31, 2022, remaining unrecognized stock-based compensation cost from all plans to be recognized in future periods totaled $14.0 million.

Restricted Stock:

Prior to the adoption of the 2020 Plan, the Company issued restricted stock. A summary of the Company’s restricted stock activity during the three months ended March 31, 2022 is as follows:

 

 

 

Shares

 

 

Fair Value

 

Weighted Average Fair Value

 

(000’s)

 

 

Per Share

 

Unvested, December 31, 2021

 

 

471

 

 

$

1.76

 

Granted

 

 

 

 

$

 

Vested

 

 

(73

)

 

$

1.82

 

Forfeited or canceled

 

 

(17

)

 

$

1.80

 

Unvested, March 31, 2022

 

 

381

 

 

$

1.75

 

 

 

As of March 31, 2022, the total unrecognized compensation cost related to stock compensation expense for restricted stock is $0.7 million, expected to be recognized over a weighted average period of 1.6 years.

 

2020 Plan

In June 2020, the Company’s board of directors adopted the 2020 Stock Option and Incentive Plan (the “2020 Plan”) and reserved 2.9 million shares of common stock for issuance under this plan. The 2020 Plan includes automatic annual increases. The increase on January 1, 2022 was 4.2 million shares. As of March 31, 2022, 2.3 million shares remain available for future grant.

The 2020 Plan authorizes the board of directors or a committee of the board to grant incentive stock options, nonqualified stock options, restricted stock awards and restricted stock units ("RSUs") to eligible officers, employees, consultants and directors of the Company. Options generally vest over a period of four years and have a contractual life of ten years from the date of grant.

 

 

9


 

Stock Options:

 

The following table summarizes the stock option activity for the 2020 Plan:

 

 

 

 

 

 

Weighted

 

 

Weighted

 

 

 

 

 

 

 

 

Average

 

 

Average

 

 

Aggregate

 

 

Number of

 

 

Exercise

 

 

Remaining

 

 

Intrinsic

 

 

Unvested

 

 

Price

 

 

Contractual

 

 

Value

 

 

Options

 

 

Per Share

 

 

Life (in years)

 

 

(000's)

 

Outstanding at December 31, 2021

 

3,659

 

 

$

4.99

 

 

 

8.67

 

 

 

 

Granted

 

1,964

 

 

$

2.31

 

 

 

9.88

 

 

 

 

Exercise

 

 

 

 

 

 

 

 

 

 

 

Forfeited/cancelled

 

(100

)

 

$

4.11

 

 

 

 

 

 

 

Outstanding at March 31, 2022

 

5,523

 

 

$

4.07

 

 

 

9.14

 

 

$

6

 

Vested at March 31, 2022

 

1,847

 

 

$

4.93

 

 

 

8.53

 

 

$

 

 

For the three months ended March 31, 2022, the weighted average grant date fair value for options granted was $1.77. There was no intrinsic value for options vested as of March 31, 2022. As of March 31, 2022, the total unrecognized compensation cost related to outstanding options was $9.2 million, to be recognized over a weighted average period of 3.1 years.

 

For the three months ended March 31, 2021, the weighted average grant date fair value for options granted was $3.58. There was no intrinsic value for options vested as of March 31, 2021.

 

The weighted average assumptions used in the Black-Scholes pricing model to determine the fair value of stock options granted during the three months ended March 31, 2022 and 2021 were as follows:

 

 

 

Three Months Ended March 31,

 

 

 

 

2022

 

 

 

2021

 

Expected term (in years)

 

 

6.0

 

 

 

6.1

 

Risk-free rate

 

 

1.85

%

 

 

0.66

%

Expected volatility

 

 

94.0

%

 

 

85.9

%

 

 

RSUs:



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

 

 

Shares
 (000's)

 

 

Weighted
Average Price
Per Share

 

 

Weighted
Average Fair Value (000's)

 

Unvested, December 31, 2021

 

 

1,200

 

 

$

3.83

 

 

$

4,596

 

Granted

 

 

 

 

 

 

 

 

 

Vested

 

 

 

 

 

 

 

 

 

Forfeited or canceled

 

 

 

 

 

 

 

 

 

Unvested, March 31, 2022

 

 

1,200

 

 

$

3.83

 

 

$

4,596

 



Weighted average price per share is the weighted grant price based on the closing market price of each of the stock grants. The weighted average fair value is the weighted average share price times the number of shares.

As of March 31, 2022, remaining unrecognized compensation cost related to RSUs to be recognized in future periods totaled $
4.2 million, which is expected to be recognized over a weighted average period of 3.6 years.

 

10


 

8. Related Parties and Related-Party Transactions

In connection with the acquisition of TRIGR Therapeutics, Inc. ("TRIGR") and upon consummation of the merger agreement on June 25, 2021, Miranda Toledano, who previously served as the Chief Financial Officer and Chief Operating Officer of TRIGR, was appointed to Compass Board of Directors as an independent director. Additionally, to facilitate the transition of CTX-009 from TRIGR, the Company entered into a consulting agreement with Ms. Toledano which ended in December 2021.

9. Other Income (Expense)

Other income (expense) consisted of the following:

 

 

 

March 31,

 

 

 

2022

 

 

2021

 

 

 

(000's)

 

Interest income

 

$

20

 

 

$

15

 

Interest expense

 

 

 

 

 

(142

)

Realized gain on disposal of equipment

 

 

 

 

 

44

 

Total other income (expense)

 

$

20

 

 

$

(83

)

 

10. License, Research and Collaboration Agreements

Collaboration Agreements

ABL Bio Corporation ("ABL Bio") Agreement

In November 2018, the Company's wholly-owned subsidiary (TRIGR) and ABL Bio, a South Korean biotechnology company, entered into an exclusive global (excluding South Korea) license agreement (the “TRIGR License Agreement”) which granted TRIGR a license to ABL001, ABL Bio’s bispecific antibody targeting DLL4 and VEGF-A (renamed CTX-009). Under the terms of the agreement, ABL Bio and TRIGR would jointly develop CTX-009, with ABL Bio responsible for development of CTX-009 throughout the end of Phase 1 clinical trials and TRIGR responsible for the development of CTX-009 from Phase 2 and onward. ABL Bio received a $5 million upfront payment and is eligible to receive up to $110 million of development and regulatory milestone payments, up to $295 million of commercial milestone payments and tiered single-digit royalties on net sales of CTX-009 in Oncology. ABL Bio is also eligible to receive up to $185 million in development, regulatory and commercial milestone payments and tiered, single-digit royalties on net sales of CTX-009 in Ophthalmology. The financial terms of the agreement were amended in May 2021 but remain substantially similar to the terms in the TRIGR License Agreement. As a result of the TRIGR acquisition in 2021, the TRIGR License Agreement was assigned to the Company and the Company has assumed all the rights and liabilities of the agreement.

In May 2021, TRIGR and ABL Bio terminated license agreements to several preclinical assets. As a result of the return of these assets to ABL Bio and termination of the license agreements, the Company is eligible to receive royalty payments if ABL Bio develops or licenses two bispecific antibodies that were previously licensed to TRIGR.


 


Adimab Agreement

The Company entered into a collaboration agreement with Adimab, LLC on October 16, 2014. The agreement includes provisions for payment of royalties at rates ranging in the single digits as a percentage of future net sales within a specified term from the first commercial sale. There were no milestone payments made during the first three months of 2022. As of March 31, 2022, future potential milestone payments in connection with this agreement amounted to $2.0 million.

Other License and Research Agreements

FUJIFILM Diosynth Biotechnologies ("Fujifilm") Agreement

The Company entered into a scope of work (“SOW”) under a master services agreement with Fujifilm on July 20, 2020. The Company made cash payments of $46 thousand and recorded $555 thousand in research and

 

11


 

development expense during the three months ended March 31, 2022 related to this agreement. The Company made cash payments of $0.2 million and recorded $1.0 million in research and development expense during the quarter ended March 31, 2021. As of March 31, 2022, future payments in connection with the SOW amounted to $1.2 million and prepayments for future work to be performed amounted to $1.2 million, for a total expense to be recognized of $2.4 million.

 

11. Subsequent events

 

None.

 

12


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of the financial condition and results of operations of Compass Therapeutics, Inc. should be read in conjunction with the financial statements and the notes to those statements included in this Quarterly Report on Form 10-Q for the 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

13


 

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:

https://cdn.kscope.io/dbc0408533783e017c6ea189b742295f-img119605530_0.jpg 

 

14


 

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

 

https://cdn.kscope.io/dbc0408533783e017c6ea189b742295f-img119605530_1.jpg 

 

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

15


 

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.

 

16


 

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