Cogent Biosciences(US:COGT)2023-03-13 16:00Part I Item 1. Business Cogent Biosciences develops precision therapies, with lead candidate bezuclastinib for SM and GIST, and other pipeline programs under regulatory oversight Bezuclastinib Program Bezuclastinib, a selective KIT inhibitor with a best-in-class profile, is being evaluated in three active clinical trials for SM and GIST - Bezuclastinib is designed as a selective Type I inhibitor targeting KIT receptor tyrosine kinase mutations, demonstrating potency comparable to FDA-approved inhibitors but with greater selectivity and limited blood-brain-barrier penetration in preclinical studies32 - The company has initiated three clinical trials—APEX (AdvSM), SUMMIT (Non-AdvSM), and PEAK (GIST)—to evaluate the safety and efficacy of bezuclastinib, all of which are actively recruiting patients14 Bezuclastinib Selectivity Profile | Compound | PDGFRa | PDGFRB | CSF1R | FLT3 | KDR | |---|---|---|---|---|---| | Bezuclastinib | >10,000 | >10,000 | >10,000 | >1000 | >1000 | | Avapritinib | 53 | 10 | 249 | 305 | >1000 | Research Programs The research team is expanding the pipeline with novel small molecule inhibitors for FGFR2 and ErbB2 mutations, with clinical trials expected in 2024 - The research team is developing a next-generation FGFR2 inhibitor designed to retain potency against resistance mutations while sparing FGFR1, potentially avoiding common toxicities like hyperphosphatemia62 - A novel ErbB2 mutant program is also underway, focusing on providing broad mutant coverage in various solid tumors while sparing wild-type EGFR engagement114 - Cogent anticipates initiating clinical trials for both the FGFR2 and ErbB2 programs in 202488 Intellectual Property Cogent protects its technology through in-licensed patents for bezuclastinib, with exclusivity extending to 2033-2034, potentially to 2043 with new formulations - The company's intellectual property strategy relies on in-licensed patents from Plexxikon, know-how, and trade secrets89 - Issued U.S. patents covering bezuclastinib and its therapeutic uses are expected to expire in 2033 and 2034. A provisional patent application for a new formulation filed in 2022 could provide exclusivity through at least 2043116 Competition Cogent faces intense competition in SM and GIST from larger pharmaceutical companies with greater resources and established therapies - In the AdvSM market, Cogent competes with approved drugs like avapritinib (Blueprint) and midostaurin (Novartis). For Non-AdvSM, there are no currently approved drugs, but Blueprint's avapritinib is under FDA review97 - In GIST, the competitive landscape includes established therapies such as imatinib, sunitinib, regorafenib, and ripretinib, as well as drug candidates from companies like Celldex, Deciphera, and Theseus Pharmaceuticals126 - Many competitors have significantly greater financial resources and expertise in R&D, manufacturing, clinical trials, and marketing123 Government Regulation Operations are extensively regulated by U.S. and EU authorities, requiring lengthy approval processes and ongoing compliance with strict post-market requirements - Drug development in the U.S. requires a multi-step process including preclinical studies, an Investigational New Drug (IND) application, and three phases of human clinical trials before submitting a New Drug Application (NDA) to the FDA101 - In the European Union, marketing authorization can be obtained through centralized or decentralized procedures, with the EMA's CHMP playing a key role. The new Clinical Trials Regulation (CTR) aims to streamline the trial application process via a centralized EU portal203178 - Both U.S. and EU regulations impose strict post-approval requirements, including adherence to Good Manufacturing Practices (cGMP), pharmacovigilance, and restrictions on off-label promotion141214246 - The company's primary focus is on developing bezuclastinib, a selective tyrosine kinase inhibitor, to treat genetically defined diseases like Systemic Mastocytosis (SM) and Gastrointestinal Stromal Tumors (GIST) by targeting KIT mutations396 - Cogent's strategy includes exploring bezuclastinib's utility in Advanced SM (AdvSM), Non-Advanced SM (Non-AdvSM), and GIST, while preparing for potential commercialization and advancing its preclinical programs for FGFR2 and ErbB230 Item 1A. Risk Factors The company faces substantial risks including bezuclastinib program failure, intense competition, reliance on third parties, regulatory hurdles, IP protection, and significant funding needs Risks Related to Discovery and Development of Our Drug Candidates Success hinges on bezuclastinib, facing risks of clinical trial failure, adverse side effects, intense competition, and challenges in patient enrollment - The business is highly dependent on the success of the bezuclastinib program, which may not succeed in its ongoing APEX, SUMMIT, and PEAK clinical trials or obtain regulatory approval299275 - The company faces significant competition from well-established biotechnology and pharmaceutical companies with greater financial resources and expertise277303 - Unacceptable side effects identified during development could lead to the abandonment or limitation of drug candidates276301 Risks Related to Our Reliance on Third Parties Extensive reliance on third-party CROs and single-source CMOs for bezuclastinib manufacturing poses significant risks to development and supply - The company depends on third-party CROs and medical institutions to conduct clinical trials, giving it less direct control over timing and execution320337 - Cogent relies on third-party CMOs for manufacturing and does not own its own facilities, increasing the risk of supply shortages, cost issues, and quality control problems323339 - The API and drug product for bezuclastinib are supplied by single-source suppliers, and the loss of any of these could significantly harm the business342326 Risks Related to Our Intellectual Property IP protection, largely in-licensed for bezuclastinib, faces risks of challenge, invalidation, infringement claims, and license termination - The company's efforts to protect its proprietary technology may not be adequate, potentially allowing competitors to erode its market position38173 - Cogent is dependent on its license agreement with Plexxikon for bezuclastinib; termination of this agreement would cause the loss of significant rights and harm the business4243 - The company may face third-party claims of intellectual property infringement, which could prevent or delay product development and lead to substantial damages or royalty payments46 Risks Related to Our Financial Position and Need for Additional Capital The company has a history of net losses, requires substantial additional funding, and faces limitations on using NOLs due to prior ownership changes - The company has incurred net losses every year since inception and expects to continue incurring losses, consuming substantial cash for R&D and clinical development346353 - Substantial additional funding is required to complete development and commercialization. Failure to raise capital may force the company to delay or scale back operations152345 - The company's ability to use its net operating loss (NOL) carryforwards is subject to an annual limitation under Section 382 due to a prior ownership change, which resulted in the write-off of some deferred tax assets348355 Item 2. Properties Cogent Biosciences leases corporate headquarters in Waltham, a research facility in Boulder, and a partially subleased former headquarters in Cambridge - The company subleases approximately 17,749 square feet of office space in Waltham, Massachusetts for its corporate headquarters, with the lease expiring in September 2026402 - A 44,657 square feet office and laboratory space is leased in Boulder, Colorado, housing research and administrative personnel under a 12-year lease term674 - The former headquarters in Cambridge, Massachusetts, approximately 33,500 square feet, is under a lease expiring in April 2023, with about 70% of the space being subleased675 Item 3. Legal Proceedings The company is not currently a party to any material legal proceedings, though it may face ordinary course claims - The company is not currently a party to any material legal proceedings268683 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Cogent's common stock trades on Nasdaq under "COGT"; the company has never paid dividends and retains earnings for operations - The company's common stock trades on the Nasdaq Global Select Market under the symbol "COGT"405 - Cogent has never paid cash dividends and does not anticipate paying any in the foreseeable future, intending to retain all available funds for business operations406 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Net loss increased to $140.2 million in 2022 due to higher R&D and G&A expenses, with $259.3 million in cash expected to fund operations into 2025 Results of Operations Net loss increased to $140.2 million in 2022, driven by a $72.3 million rise in operating expenses, primarily R&D and G&A Results of Operations (2022 vs 2021) (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | Change | |---|---|---|---| | Research and development | $121,627 | $55,913 | $65,714 | | General and administrative | $26,212 | $19,638 | $6,574 | | Total operating expenses | $147,839 | $75,551 | $72,288 | | Loss from operations | $(147,839) | $(75,551) | $(72,288) | | Total other income, net | $7,598 | $3,278 | $4,320 | | Net loss | $(140,241) | $(72,273) | $(67,968) | - R&D expenses increased by $65.7 million in 2022, driven by higher external costs for the manufacturing and development of bezuclastinib for the APEX, SUMMIT, and PEAK trials, as well as increased personnel costs and lab supplies for the research team601 - G&A expenses increased by $6.6 million in 2022, primarily due to higher personnel costs from increased headcount, including a $2.6 million increase in stock-based compensation602 Liquidity and Capital Resources Cogent held $259.3 million in cash as of Dec 2022, sufficient into 2025, after raising $161.9 million from an offering, but requires more funding - The company had $259.3 million in cash, cash equivalents, and marketable securities as of December 31, 2022, which is expected to fund operations into 2025448438 - In June 2022, the company completed an underwritten public offering, raising net proceeds of approximately $161.9 million578569 Cash Flow Summary (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | |---|---|---| | Net cash used in operating activities | $(118,638) | $(58,763) | | Net cash used in investing activities | $(124,718) | $(1,719) | | Net cash provided by financing activities | $163,558 | $37,976 | Item 8. Financial Statements and Supplementary Data This section presents the independent auditor's report and consolidated financial statements for 2022 and 2021, including balance sheets, income statements, equity, cash flows, and notes Consolidated Financial Statements The consolidated financial statements show total assets of $300.8 million, liabilities of $45.1 million, and a net loss of $140.2 million in 2022 Consolidated Balance Sheet Highlights (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | |---|---|---| | Cash, cash equivalents & marketable securities | $259,276 | $219,684 | | Total Assets | $300,810 | $232,092 | | Total Liabilities | $45,075 | $17,908 | | Total Stockholders' Equity | $255,735 | $214,184 | Consolidated Statement of Operations Highlights (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | |---|---|---| | Total operating expenses | $147,839 | $75,551 | | Net loss | $(140,241) | $(72,273) | | Net loss per share | $(2.39) | $(1.87) | Notes to Consolidated Financial Statements Notes detail accounting policies, including expensing R&D, valuation allowance for deferred tax assets, NOL carryforwards, and operating lease commitments - Research and development costs, including upfront and milestone payments for licensed technology, are expensed as incurred504505 - The company has federal and state net operating loss (NOL) carryforwards of $151.9 million and $65.1 million, respectively, as of Dec 31, 2022. However, a full valuation allowance has been established against deferred tax assets due to uncertainty of realization608610 - Under its license agreement with Plexxikon, the company is obligated to pay up to $7.5 million in clinical milestones and $25.0 million in regulatory milestones, plus tiered royalties on net sales. A $2.5 million clinical milestone was paid in June 2022617 Item 9A. Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of December 31, 2022622 - Management assessed internal control over financial reporting based on the COSO framework and concluded it was effective as of December 31, 2022624 - The company is an emerging growth company and is therefore exempt from the auditor attestation requirement regarding internal control over financial reporting728 Part III Items 10-14 Information for Items 10-14, covering governance, compensation, and ownership, is incorporated by reference from the 2023 proxy statement - The information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the definitive proxy statement for the 2023 Annual Meeting of Stockholders365645 Part IV Item 15. Exhibits, Financial Statement Schedules This section lists financial statements, schedules, and exhibits, including key agreements and certifications, filed as part of the Form 10-K - This item contains the index of financial statements and a list of all exhibits filed with the annual report632 - Key exhibits include the License Agreement with Plexxikon Inc. (10.8), the Underwriting Agreement from the June 2022 offering (10.11), and various employment and compensation plan documents660661