SEC Filing – Compass Therapeutics, Inc.

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10-Q

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


☐	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.

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

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.

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.

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.

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.

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.

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.

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

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.

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.

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.

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

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.

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

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.