COMPASS Pathways(CMPS) - 2021 Q4 - Annual Report

PART I Business COMPASS Pathways is a clinical-stage mental health care company focused on developing its proprietary psilocybin formulation, COMP360, in conjunction with psychological support for treatment-resistant depression (TRD) - The company's lead program is COMP360 psilocybin therapy, targeting treatment-resistant depression (TRD), a condition affecting approximately 100 million people globally[20][31] - In November 2021, COMPASS announced positive topline results from its 233-participant Phase IIb trial, the largest randomized, controlled, double-blind psilocybin therapy trial to date. The trial met its primary endpoint, with the 25mg dose showing a statistically significant reduction in depressive symptoms compared to a 1mg dose at three weeks[20][80] Phase IIb Trial (TRD) Key Efficacy Results (25mg vs 1mg dose) | Metric | Week 3 Result | Week 12 Result | | :--- | :--- | :--- | | MADRS Score Change | -6.6 difference (p<0.001) | - | | Response Rate | 36.7% vs 17.7% | - | | Remission Rate | 29.1% vs 7.6% | - | | Sustained Response Rate | - | 24.1% vs 10.1% | - The company's strategy includes initiating a Phase III program for TRD in 2022, expanding COMP360 into other indications such as PTSD (Phase II trial began Nov 2021), and exploring new compounds through its Discovery Center[25][26][27] - COMPASS is building a new mental health care model by establishing 'Centers of Excellence' for research and therapist training, with the first one established in January 2021 with The Sheppard Pratt Institute[28][143] - The company relies on contract drug manufacturing organizations (CDMOs) for the synthesis and manufacturing of COMP360 and does not own or operate its own manufacturing facilities[140] Risk Factors The company faces significant risks, including a history of losses, funding needs, and dependency on its sole therapeutic candidate, COMP360 - Financial Risk: The company is a clinical-stage entity with a history of significant losses and expects to incur losses for the foreseeable future. Substantial additional funding is required to complete development and commercialization, and failure to obtain it could force delays or termination of programs[224][227] - Product Dependency Risk: The business is highly dependent on the successful development and regulatory approval of its sole investigational therapy, COMP360 psilocybin therapy[233] - Regulatory & Legal Risk: COMP360 is subject to strict controlled substance laws (Schedule I in the U.S.) which require rescheduling by the DEA post-FDA approval, a process that could be lengthy and uncertain. Adverse public perception of psilocybin could also negatively influence success[236][238][242] - Clinical & Commercialization Risk: Clinical development is a lengthy, expensive process with uncertain outcomes. The company has no prior experience commercializing a therapy and success depends on market acceptance, therapist training, and establishing a network of third-party therapy sites[243][267][275] - Third-Party Reliance Risk: The company relies on third parties for manufacturing (CMOs) and conducting clinical trials (CROs). Failure of these parties to perform or comply with regulations could significantly delay or halt development[336][339] - Intellectual Property Risk: The company's patents may be challenged, found invalid, or unenforceable. Third-party IP rights could also adversely affect the ability to commercialize therapies, potentially requiring costly litigation or licensing[313][316][324] Unresolved Staff Comments The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[408] Properties The company leases office space for its corporate headquarters in London, UK, with additional leased offices in San Francisco and New York City, USA - The company's corporate headquarters is leased office space in London, UK. It also leases office space in San Francisco and New York[408] - The company is part of the BioLabs@NYULangone incubator space and the START-UP NY program, which provide tax and other incentives[408] Legal Proceedings The company is not currently a party to any material litigation or claims that would have a material adverse effect on its business - As of the report date, the company is not involved in any material legal proceedings[411] Mine Safety Disclosures This item is not applicable to the company - No mine safety disclosures are required[412] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's American Depositary Shares (ADSs) have traded on The Nasdaq Global Select Market under the symbol "CMPS" since September 18, 2020, and it does not anticipate paying cash dividends - The company's ADSs, each representing one ordinary share, are listed on The Nasdaq Global Select Market under the symbol "CMPS"[414] - The company has never paid cash dividends and does not plan to in the foreseeable future, as it intends to retain earnings to fund business growth[415] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported a net loss of $71.7 million for 2021, an increase from $60.3 million in 2020, driven by higher R&D and G&A expenses, with $273.2 million cash as of December 31, 2021 Results of Operations (in thousands) | Line Item | 2021 | 2020 | | :--- | :--- | :--- | | Research and development | $44,027 | $23,366 | | General and administrative | $39,194 | $28,027 | | Loss from operations | ($83,221) | ($51,393) | | Total other income (expense), net | $11,678 | ($8,909) | | Net loss | ($71,742) | ($60,334) | - Research and development expenses increased by $20.7 million in 2021, primarily due to a $16.1 million increase in external development costs related to clinical trials and a $6.0 million increase in personnel expenses from hiring[437] - General and administrative expenses increased by $11.2 million in 2021, driven by a $7.9 million increase in personnel costs from new hires and a $9.0 million increase in facilities and other expenses, including higher D&O insurance[441] - As of December 31, 2021, the company had cash and cash equivalents of $273.2 million, which is expected to fund operations into 2024[423][453] - Net cash used in operating activities was $67.7 million in 2021, compared to $41.4 million in 2020, reflecting the increased net loss and changes in working capital[454][455] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risks are interest rate fluctuations and foreign currency exchange rate fluctuations, with no current hedging instruments - The company's main market risks are interest rate risk on its cash holdings and foreign currency exchange risk[480] - Foreign currency risk arises from operating in multiple currencies (USD, GBP, EUR), with the reporting currency in USD and the primary functional currency in GBP. The company does not currently use currency hedging[483] Financial Statements and Supplementary Data This section incorporates the company's consolidated financial statements and supplementary data by reference, appended at the end of the Annual Report - The company's audited consolidated financial statements are included at the end of the report, beginning on page F-1[484] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - There were no disagreements with accountants on accounting and financial disclosure[486] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with the latter audited by PricewaterhouseCoopers LLP - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[487] - Management concluded that internal control over financial reporting was effective as of December 31, 2021. This assessment was audited by the company's independent registered public accounting firm[488] Other Information This section summarizes material U.S. federal income tax and UK tax consequences for holders of the company's shares or ADSs, including potential PFIC/CFC risks - Provides a summary of material U.S. federal income tax and UK tax consequences for holders of ordinary shares or ADSs[491] - Discusses the risk of the company being classified as a Passive Foreign Investment Company (PFIC) or a Controlled Foreign Corporation (CFC), which could lead to adverse U.S. tax consequences for certain U.S. holders[497][379] - Dividends paid by the company are not subject to UK withholding tax[515] PART III Directors, Executive Officers and Corporate Governance Information regarding the company's directors, executive officers, and corporate governance will be provided in the Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated by reference - Required information is incorporated by reference from the company's upcoming Proxy Statement for the 2022 Annual Meeting of Stockholders[536] Executive Compensation Information regarding executive compensation will be provided in the Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated by reference - Required information is incorporated by reference from the company's upcoming Proxy Statement for the 2022 Annual Meeting of Stockholders[537] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management, as well as related stockholder matters, will be provided in the Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated by reference - Required information is incorporated by reference from the company's upcoming Proxy Statement for the 2022 Annual Meeting of Stockholders[539] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related party transactions, and director independence will be provided in the Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated by reference - Required information is incorporated by reference from the company's upcoming Proxy Statement for the 2022 Annual Meeting of Stockholders[540] Principal Accountant Fees and Services Information regarding principal accountant fees and services will be provided in the Proxy Statement for the 2022 Annual Meeting of Stockholders and is incorporated by reference - Required information is incorporated by reference from the company's upcoming Proxy Statement for the 2022 Annual Meeting of Stockholders[541] PART IV Exhibits and Financial Statement Schedules This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report - This item provides an index of the financial statements and exhibits filed with the Annual Report[544][546] Form 10-K Summary The company has not provided a summary for Form 10-K - No Form 10-K summary is provided[551] Financial Statements Report of Independent Registered Public Accounting Firm PricewaterhouseCoopers LLP issued an unqualified opinion on the company's consolidated financial statements and internal control over financial reporting as of December 31, 2021 - The independent auditor, PricewaterhouseCoopers LLP, issued an unqualified (clean) opinion on both the consolidated financial statements and the effectiveness of internal control over financial reporting[556] - The audit identified one Critical Audit Matter: the significant management judgment required to determine the amount of qualifying expenses for the UK's Research and Development (R&D) tax credit[561] Consolidated Financial Statements The consolidated financial statements detail the company's financial position, results of operations, and cash flows, showing a $71.7 million net loss in 2021 and $273.2 million cash as of December 31, 2021 Consolidated Balance Sheet Data (in thousands) | Account | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $273,243 | $190,327 | | Total current assets | $295,300 | $202,404 | | Total assets | $300,898 | $203,456 | | Total current liabilities | $15,107 | $6,895 | | Total liabilities | $16,486 | $6,895 | | Total shareholders' equity | $284,412 | $196,561 | Consolidated Statement of Operations Data (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Research and development | $44,027 | $23,366 | $12,563 | | General and administrative | $39,194 | $28,027 | $8,616 | | Loss from operations | ($83,221) | ($51,393) | ($21,179) | | Net loss | ($71,742) | ($60,334) | ($19,612) | Consolidated Statement of Cash Flows Data (in thousands) | Account | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash used in operating activities | ($67,745) | ($41,380) | ($17,813) | | Net cash used in investing activities | ($334) | ($628) | ($165) | | Net cash provided by financing activities | $156,646 | $194,155 | $18,379 |