Corbus Pharmaceuticals Holdings, Inc. — Q1 2016 Form 10-Q Summary
Business context and reporting period
Corbus is a clinical-stage pharmaceutical company developing Resunab, an oral CB2-targeting therapy for rare inflammatory and fibrotic diseases. The filing covers the three months ended March 31, 2016. Resunab was being evaluated in Phase 2 studies for cystic fibrosis, systemic sclerosis and dermatomyositis, with a systemic lupus erythematosus study planned for 2017.
Financial condition and key metrics
| Metric | Q1 2016 | Q1 2015 |
|---|---|---|
| Collaboration revenue | $396,598 | $0 |
| Research and development expense | $2.174 million | $0.723 million |
| General and administrative expense | $1.110 million | $0.812 million |
| Total operating expenses | $3.284 million | $1.535 million |
| Operating loss | $2.887 million | $1.535 million |
| Net loss | $2.892 million | $1.536 million |
| Net loss per share | $0.08 | $0.06 |
| Net cash used in operating activities | $2.515 million | $1.280 million |
The company had no product sales and therefore no product gross margin. Collaboration revenue represented recognition of deferred Cystic Fibrosis Foundation Therapeutics funding rather than commercial product revenue.
- Cash and cash equivalents were $9.688 million at March 31, 2016, down from $12.338 million at December 31, 2015.
- Working capital was approximately $6.086 million, based on current assets of $10.162 million and current liabilities of $4.076 million.
- Total assets were $10.495 million; total liabilities were $4.091 million; stockholders’ equity was $6.404 million.
- Debt consisted primarily of $92,958 of current notes payable. The company had no long-term portion of notes payable.
- Deferred revenue totaled $1.455 million, all classified as current at March 31, 2016.
- Accumulated deficit was $16.170 million.
- Stock-based compensation expense was $311,238, a non-cash charge.
Material changes versus the prior comparable period
- Revenue increased from zero to $396,598 because the company began recognizing CFFT award funding over the development-program performance period.
- Research and development expense increased approximately $1.451 million, primarily due to a $1.124 million increase in clinical-trial costs and higher compensation and stock-based compensation.
- General and administrative expense increased approximately $298,000, driven mainly by higher legal, compensation and investor-relations costs, partly offset by lower stock-based compensation.
- Net loss increased approximately 88% year over year, from $1.536 million to $2.892 million.
- Operating cash use increased approximately 97% year over year to $2.515 million.
- Cash declined $2.650 million during the quarter, including $65,322 of capital expenditures and $70,180 of financing cash use, principally debt repayments.
- Property and equipment increased to $296,534 from $124,138, reflecting the company’s move into expanded office space and related equipment purchases.
Guidance, outlook, risks and unusual items
- Management expected existing cash, together with anticipated CFFT milestone payments, to fund operations and capital requirements into the fourth quarter of 2016.
- The company stated that it would need significant additional capital to continue operations and fund Resunab clinical trials. Potential sources included equity, convertible or other debt, collaborative arrangements and government grants.
- Management disclosed substantial doubt about the company’s ability to continue as a going concern because of recurring losses, expected future operating losses and dependence on additional financing. The financial statements were not adjusted for this uncertainty.
- The CFFT award provided up to $5 million. The company had received $2.5 million through March 31, 2016, with the remaining $2.5 million payable upon specified clinical milestones. The arrangement includes potential commercialization, sales and change-of-control payment obligations to CFFT.
- Management expected significant increases in expenses related to clinical trials, manufacturing, regulatory activities, personnel and public-company compliance.
- Contractual obligations totaled approximately $746,876, consisting primarily of office lease commitments of $734,871 and capital lease obligations of $12,005.
- The company reported no legal proceedings, no material changes to previously reported risk factors, and no material off-balance-sheet arrangements.
- Management concluded that disclosure controls and procedures were effective and that no material change had occurred in internal control over financial reporting.
Important facts for investors to verify
- Timing and amount of additional financing, including potential dilution or debt restrictions.
- Whether CFFT milestones are achieved and the timing of the remaining award payments.
- Clinical-trial enrollment, results, regulatory status and expected completion dates for Resunab programs.
- Cash-burn trends and whether liquidity extends beyond the stated fourth-quarter 2016 expectation.
- Potential future payment obligations to CFFT upon commercialization, licensing, sales thresholds or a change of control.
- Impact of increasing research, development, manufacturing and public-company expenses on the company’s path to profitability.