Cortexyme Earnings 2021-03-31

Cortexyme Earnings 2021-03-31

CRTX 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

crtx-10q_20210331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 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, 2021

☐	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: 001-38890

Cortexyme, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware	90-1024039
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
269 East Grand Ave. South San Francisco, California	94080
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (415) 910-5717

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, par value $0.001 per share

CRTX

Nasdaq Global Select 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, a 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 3, 2021, the registrant had 29,588,481 shares of common stock, $0.001 par value per share, outstanding.

Table of Contents

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss	2
	Condensed Consolidated Statements of Stockholders’ Equity	3
	Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	61
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
Signatures		64

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

Cortexyme, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share amounts)

	March 31, 2021			December 31, 2020 (1)
ASSETS
Current assets:
Cash and cash equivalents	$	85,315		$	66,841
Short term investments		61,720			66,979
Prepaid expenses and other current assets		2,850			4,042
Total current assets		149,885			137,862
Property and equipment, net		378			427
Operating lease right-of-use assets, net		500			674
Long term investments		23,720			50,464
Other assets		39			39
Total assets	$	174,522		$	189,466

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,845		$	3,555
Accrued expenses and other current liabilities		15,022			13,441
Total current liabilities		17,867			16,996
Long-term operating lease liability		171			208
Total liabilities		18,038			17,204
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000,000 authorized, no shares issued and outstanding as of March 31, 2021 and December 31, 2020		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized, 29,575,944 and 29,543,222 issued and outstanding as of March 31, 2021 and December 31, 2020, respectively		29			29
Additional paid in capital		326,006			318,574
Accumulated other comprehensive income		189			313
Accumulated deficit		(169,740	)		(146,654	)
Total stockholders’ equity		156,484			172,262
Total liabilities and stockholders’ equity	$	174,522		$	189,466

(1)	The balance sheet as of December 31, 2020 is derived from the audited financial statements as of that date

See accompanying notes.

Cortexyme, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share amounts)

	Three Months Ended March 31,
	2021			2020
Operating expenses:
Research and development	$	16,824		$	14,380
General and administrative		6,489			3,478
Total operating expenses		23,313			17,858
Loss from operations		(23,313	)		(17,858	)
Interest income		227			682
Net loss		(23,086	)		(17,176	)
Other comprehensive loss:
Unrealized loss on available for sales securities		(124	)		(97	)
Total comprehensive loss		(23,210	)		(17,273	)
Net loss per share - basic and diluted		(0.78	)		(0.61	)
Weighted average shares of common stock outstanding - basic and diluted		29,554,921			28,261,719

See accompanying notes.

Cortexyme, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share and per share amounts)

	Common Stock				Additional Paid in		Accumulated Other Comprehensive			Accumulated			Total Stockholders'
	Shares		Amount		Capital		Income / (Loss)			Deficit			Equity
Balance January 1, 2021		29,543,222	$	29	$	318,574	$	313		$	(146,654	)	$	172,262
Exercise of stock options		32,722		—		441		—			—			441
Stock based compensation		—		—		6,991		—			—			6,991
Other comprehensive loss		—		—		—		(124	)		—			(124	)
Net loss		—		—		—		—		$	(23,086	)		(23,086	)
Balance March 31, 2021		29,575,944	$	29	$	326,006	$	189		$	(169,740	)	$	156,484

Balance January 1, 2020		26,869,413	$	27	$	185,196	$	60		$	(69,805	)	$	115,478
Issuance of common stock in connection with private placement, net of issuance costs of $7,310		2,500,000		2		117,688		—			—			117,690
Exercise of stock options		35,127		—		191		—			—			191
Stock based compensation		—		—		1,955		—			—			1,955
Other comprehensive loss		—		—		—		(97	)		—			(97	)
Net loss		—		—		—		—		$	(17,176	)		(17,176	)
Balance March 31, 2020		29,404,540	$	29	$	305,030	$	(37	)	$	(86,981	)	$	218,041

See accompanying notes.

Cortexyme, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	For the Three Months Ended March 31,
	2021			2020
Cash flows from operating activities
Net Loss	$	(23,086	)	$	(17,176	)
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash rent expense		92			92
Stock based compensation		6,991			1,955
Depreciation and amortization		86			83
Amortization of premium on available for sale investments		202		56
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		1,192			49
Accounts payable		(710	)		1,879
Accrued expenses and other current liabilities		1,623			2,283
Net cash used in operating activities		(13,610	)		(10,779	)
Cash flow from investing activities:
Purchase of investments		(11,980	)		(95,543	)
Proceeds from maturities of investments		43,660			22,867
Purchase of property and equipment		(37	)		(5	)
Net cash provided by / (used in) investing activities		31,643			(72,681	)
Cash flows from financing activities:
Payments of finance leases		—			(29	)
Proceeds from issuance of common stock upon exercise of stock options		441			191
Proceeds from private placement offering, net of issuance costs		—			117,690
Net cash provided by financing activities		441			117,852
Net increase in cash and cash equivalents		18,474			34,392
Cash and cash equivalents at beginning of period		66,841			51,214
Cash and cash equivalents at end of period	$	85,315		$	85,606

See accompanying notes.

Cortexyme, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1. Organization

Description of Business

Cortexyme, Inc. (the “Company”) was incorporated in the State of Delaware in June 2012 and is headquartered in South San Francisco, California. The Company is a clinical stage biopharmaceutical company focused on developing therapeutics based on data supporting a new theory of the cause of Alzheimer’s disease and other degenerative disorders. Cortexyme is targeting a specific, infectious pathogen tied to neurodegeneration and chronic inflammation in humans and animal models.

Private Investment in Public Equity (“PIPE”)

In February 2020, the Company completed a private investment in public equity transaction (“PIPE Financing”). The Company entered into Stock Purchase Agreements (the “Purchase Agreements”) with certain accredited investors, including an entity affiliated with a member of the Company’s Board of Directors, pursuant to which the Company sold and issued shares of common stock for aggregate gross proceeds of $125.0 million. Costs related to the offering were $7.3 million. Pursuant to the Purchase Agreements, the Company sold 2,500,000 common shares at $50.00 per common share. In connection with the PIPE Financing, the Company filed a registration statement on Form S-1 (File No. 333-237594), with the SEC registering for resale the shares of common stock issued in the PIPE Financing. The registration statement was declared effective by the SEC on April 13, 2020.

Liquidity and Capital Resources

The Company has incurred losses and negative cash flows from operations since inception and expects to continue to generate operating losses for the foreseeable future. As of March 31, 2021, the Company had an accumulated deficit of $169.7 million. Since inception through March 31, 2021, the Company has funded operations primarily with the net proceeds from the issuance of convertible promissory notes, from the issuance of redeemable convertible preferred stock, from the net proceeds from the Company’s initial public offering (the “IPO”) and from the net proceeds from the PIPE Financing. As of March 31,2021, the Company had cash, cash equivalents, and short-term investments of $147.0 million, which it believes will be sufficient to fund its planned operations for a period of at least 12 months from the date of the issuance of the accompanying unaudited consolidated financial statements. The Company also has long-term investments of $23.7 million.

Management expects to incur additional losses in the future to fund its operations and conduct product research and development and may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of its product candidate.

Note 2. Summary of Significant Accounting Policies

Basis of Consolidation

The condensed consolidated financial statements include the accounts of Cortexyme, Inc. and its wholly owned subsidiary. All intercompany balances and transactions have been eliminated.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and pursuant to the instructions of the SEC on Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The condensed consolidated balance sheet as of March 31, 2021, the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 and 2020, the condensed consolidated statements of stockholders’ equity as of March 31, 2021 and 2020, the condensed consolidated statements of cash flows for the three months ended March 31,

2021 and 2020, and the financial data and other financial information disclosed in the notes to the condensed consolidated financial statements are unaudited. These financial statements should be read in conjunction with the audited financial statements and notes thereto for the year ended December 31, 2020 included in the Company’s Form 10-K filed with the SEC on March 1, 2021. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any other future annual or interim period.

Risks and Uncertainties

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s potential drug candidates, uncertainty of market acceptance of the Company’s drug candidates, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals. The Company’s drug candidate will require approvals from the U.S. Food and Drug Administration (FDA) and comparable foreign regulatory agencies prior to commercial sales in their respective jurisdictions. There can be no assurance that any drug candidate will receive the necessary approvals. If the Company was denied approval, approval was delayed or the Company was unable to maintain approval for any drug candidate, it could have a materially adverse impact on the Company.

In connection with the COVID-19 pandemic, governments have implemented significant measures, including closures, quarantines, travel restrictions and other social distancing directives, intended to control the spread of the virus. Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing businesses. To the extent that these restrictions remain in place, additional prevention and mitigation measures are implemented in the future or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19, there is likely to be a continuing, adverse impact on global economic conditions and consumer confidence and spending, which could materially and adversely affect the Company’s research and development, as well as operational activities. At this time, the Company continues to manage and mitigate potential disruptions to its research and future manufacturing and supply chain considerations. The Company has not experienced significant hinderances to its operations or material negative financial impacts as compared to prior periods. At this time, the extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments which are highly uncertain and cannot be predicted.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and expenses, as well as related disclosure of contingent assets and liabilities. The most significant estimates used in the Company’s consolidated financial statements relate to the determination of the fair value of common stock prior to the initial public offering, stock-based awards and other issuances, accruals for research and development costs, useful lives of long-lived assets, stock-based compensation and related assumptions, the incremental borrowing rate for leases and income tax uncertainties, including a valuation allowance for deferred tax assets; and contingencies. The Company bases its estimates on historical experience and on various other market specific and other relevant assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ materially from the Company’s estimates.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the three months ended March 31, 2021, as compared to the significant accounting policies described in our Annual Report on Form 10-K.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash and cash equivalents. Cash equivalents, which consist of amounts invested in money market funds, are stated at fair value. There are no unrealized gains or losses on the money market funds for the periods presented.

Fair Value Measurements

The fair value of the Company’s financial instruments reflects the amounts that the Company estimates that it would receive in connection with the sale of an asset or pay in connection with the transfer of a liability in an orderly transaction between market participants at the measurement date (exit price). The Company discloses and recognizes the fair value of its assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to valuations based upon unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to valuations based upon unobservable inputs that are significant to the valuation (Level 3 measurements). The guidance establishes three levels of the fair value hierarchy as follows:

Level 1 - Inputs that reflect unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date;

Level 2 - Inputs other than quoted prices that are observable for the assets or liability either directly or indirectly, including inputs in markets that are not considered to be active;

Level 3 - Inputs that are unobservable. Assets and liabilities measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires management to make judgments and consider factors specific to the asset or liability. The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period.

Recent Accounting Pronouncements Not Yet Adopted

The following are new accounting pronouncements that the Company is evaluating for future impacts on its financial statements:

Financial Instruments—Credit Losses: In June 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which amends the principles around the recognition of credit losses by mandating entities incorporate an estimate of current expected credit losses when determining the value of certain assets. The guidance also amends reporting around allowances for credit losses on available-for-sale marketable securities. In November 2019, the FASB issued ASU 2019-10, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815) and Leases (Topic 842): Effective Dates, which established that a one-time determination of the effective date for ASU 2016-13 would be based on the Company’s SEC reporting status as of November 15, 2019. The Company was a “smaller reporting company” as defined by Item 10 of Regulation S-K, and therefore, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is evaluating the impact of the guidance on its financial statements.

All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable.

Note 3. Fair Value Measurements

The Company measures and reports its cash equivalents and investments at fair value.

Money market funds are measured at fair value on a recurring basis using quoted prices and are classified as Level 1. Investments are measured at fair value based on inputs other than quoted prices that are derived from observable market data and are classified as Level 2 inputs.

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of March 31, 2021 and December 31, 2020 are presented in the following tables (in thousands):

	Fair Value Measurements at March 31, 2021
	Total		Level 1		Level 2		Level 3
Money market funds	$	38,246	$	38,246	$	—	$	—
Certificates of Deposit		17,888		—		17,888		—
Repurchase Agreements		22,500		—		22,500		—
Corporate notes		59,377		—		59,377		—
Government and agency notes		4,686		—		4,686		—
Municipal notes		3,489		—		3,489		—
Total	$	146,186	$	38,246	$	107,940	$	—

	Fair Value Measurements at December 31, 2020
	Total		Level 1		Level 2		Level 3
Money market funds	$	15,661	$	15,661	$	—	$	—
Certificates of Deposit		30,765		—		30,765		—
Repurchase Agreements		15,000		—		15,000		—
Corporate notes		75,426		—		75,426		—
Government and agency notes		8,296		—		8,296		—
Municipal notes		3,446		—		3,446		—
Total	$	148,594	$	15,661	$	132,933	$	—

The following table summarizes the available-for-sale securities (in thousands):

	Fair Value Measurements at March 31, 2021
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	38,246	$	—	$	—		$	38,246
Certificates of Deposit		17,793		95		—			17,888
Repurchase Agreements		22,500		—		—			22,500
Corporate notes		59,300		97		(20	)		59,377
Government and agency notes		4,671		16		(1	)		4,686
Municipal notes		3,488		2		(1	)		3,489
Total cash equivalents and investments	$	145,998	$	210	$	(22	)	$	146,186

Classified as:
Cash equivalents (maturities within 90 days)								$	60,746
Short-term investments (maturities within one year)									61,720
Long-term investments (maturities beyond 1 year)									23,720
Total cash equivalents and investments								$	146,186

	Fair Value Measurements at December 31, 2020
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
Money market funds	$	15,661	$	—	$	—		$	15,661
Certificates of Deposit		30,603		162		—			30,765
Repurchase Agreements		15,000		—		—			15,000
Corporate notes		75,298		183		(55	)		75,426
Government and agency notes		8,274		22		—			8,296
Municipal notes		3,445		1		—			3,446
Total cash equivalents and investments	$	148,281	$	368	$	(55	)	$	148,594

Classified as:
Cash equivalents (maturities within 90 days)								$	31,151
Short-term investments (maturities within one year)									66,979
Long-term investments (maturities beyond 1 year)									50,464
Total cash equivalents and investments								$	148,594

As of March 31, 2021, the remaining contractual maturities of available-for-sale securities was approximately 10 months. There have been no significant realized gains or losses on available-for-sale securities for the period presented. Based on the Company’s review of its available-for-sale securities, the Company has a limited number of available-for-sale securities in insignificant loss positions as of March 31, 2021, none of which have been in a loss position for more than a year. The Company believes it had no other-than-temporary impairments on these securities as of March 31, 2021, because the Company does not intend to sell these securities nor does the Company believe that it will be required to sell these securities before the recovery of their amortized cost basis.

The investments are classified as available-for-sale securities. At March 31, 2021 and December 31, 2020, the balance in the Company’s accumulated other comprehensive income was comprised primarily of activity related to the Company’s available-for-sale securities. There were no realized gains or losses recognized on the sale or maturity of available-for-sale securities for the three months ended March 31, 2021 and as a result, the Company did not reclassify any amounts out of accumulated other comprehensive income for the quarter.

There were no transfers between Levels 1, 2 or 3 for the period presented.

Note 4: Cash, cash equivalents and investments

The following tables categorize the fair values of cash, cash equivalents, short-term investments and long-term investments measured at fair value on a recurring basis on our balance sheets (in thousands):

	March 31, 2021	December 31, 2020
Cash and cash equivalents:

Price	24.65	EPS	-1
Shares	27	P/E	-27
MCap	662	P/FCF	-30
Net Debt	-121	EBIT	-25
TEV	541	TEV/EBIT	-22
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-06
10-K	2020-12-31	Filed 2021-03-01
10-Q	2020-09-30	Filed 2020-11-12
10-Q	2020-06-30	Filed 2020-08-14
S-1	2020-04-07	Public Filing
10-Q	2020-03-31	Filed 2020-05-12
10-K	2019-12-31	Filed 2020-03-16
10-Q	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-08-09
S-1	2019-04-12	Public Filing
10-Q	2019-03-31	Filed 2019-06-12

8-K	2021-02-12
8-K	2021-02-09
8-K	2021-01-26
8-K	2021-01-19
8-K	2020-12-04
8-K	2020-06-08
8-K	2020-05-18
8-K	2020-05-12
8-K	2020-04-27
8-K	2020-03-17
8-K	2020-02-05
8-K	2019-05-13

EX-31.1	crtx-ex311_7.htm
EX-31.2	crtx-ex312_8.htm
EX-32.1	crtx-ex321_6.htm
EX-32.2	crtx-ex322_9.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company