Corbus Pharmaceuticals Holdings, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Corbus Pharmaceuticals is a clinical-stage biopharmaceutical company developing Resunab, an oral anti-inflammatory drug targeting rare, chronic inflammatory and fibrotic diseases. The filing covers the quarter and six months ended June 30, 2015, with comparative periods ended June 30, 2014. The financial statements are unaudited.
Resunab had commenced Phase IIa trials for dermatomyositis and received FDA clearance to initiate Phase 2 trials for cystic fibrosis and systemic sclerosis. The company began trading on the Nasdaq Capital Market under the symbol CRBP on April 16, 2015.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2015 | Six Months Ended June 30, 2015 |
|---|---|---|
| Collaboration revenue | $113,636 | $113,636 |
| Research and development expense | $1,707,256 | $2,430,686 |
| General and administrative expense | $969,076 | $1,780,945 |
| Total operating expenses | $2,676,332 | $4,211,631 |
| Operating loss | $(2,562,696) | $(4,097,995) |
| Net loss | $(2,562,541) | $(4,098,259) |
| Basic and diluted loss per share | $(0.10) | $(0.16) |
The company has not generated product sales, has never been profitable, and expects significant additional expenses and operating losses for the foreseeable future. Profit margins are not meaningful because revenue is limited to collaboration revenue and the company remains pre-commercial.
- Cash and cash equivalents were $9.24 million at June 30, 2015, compared with $6.26 million at December 31, 2014.
- Total assets were $9.56 million and total liabilities were $2.80 million at June 30, 2015.
- Stockholders’ equity was $6.77 million; accumulated deficit was $8.53 million.
- Current liabilities included $1.07 million of accounts payable, $0.20 million payable to a related party, $0.39 million of accrued expenses, and $0.68 million of current deferred revenue.
- The company had no notes payable outstanding at June 30, 2015; a $144,389 balance outstanding at December 31, 2014 was repaid during the period.
- Net cash used in operating activities was $1.26 million for the six months ended June 30, 2015. Net cash used in investing activities was $16,222, primarily for property and equipment.
- Net cash provided by financing activities was $4.26 million, including approximately $4.40 million from exercises of stock options and warrants.
- Working capital was approximately $7.15 million based on management’s discussion.
Material Changes Versus the Prior Comparable Period
- Six-month collaboration revenue increased from zero to $113,636 following the Cystic Fibrosis Foundation Therapeutics development award.
- Six-month research and development expense increased by approximately $2.20 million, primarily due to higher Resunab manufacturing, clinical trial, consulting, compensation, stock-based compensation, and recruiting costs.
- Six-month general and administrative expense increased by approximately $1.44 million, reflecting higher investor relations, public-company listing, legal and accounting, stock-based compensation, personnel, insurance, and board costs.
- Six-month net loss increased to $4.10 million from $0.62 million, and loss per share increased to $0.16 from $0.04.
- Cash increased by $2.98 million during the first six months of 2015, compared with an $8.20 million increase in the prior-year period, when equity financing proceeds were substantially higher.
- Common shares outstanding increased to 30.75 million at June 30, 2015 from 25.94 million at December 31, 2014. The increase primarily reflected the issuance of 4.81 million shares from option and warrant exercises.
- Non-cash stock-based compensation increased to $602,863 from $26,412 for the six-month periods.
- The $30,000 six-month loss from changes in fair value of the warrant liability recorded in 2014 did not recur; no derivative warrant liability remained at June 30, 2015.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management estimated that cash on hand, expected warrant-exercise proceeds, and anticipated milestones under the Cystic Fibrosis Foundation award would fund operating and capital requirements into the fourth quarter of 2016. Management also stated that significant additional capital will be required to fund Resunab clinical trials.
- The Cystic Fibrosis Foundation award provides up to $5.0 million. The company received $1.25 million upon signing and may receive approximately $3.75 million in additional milestone payments. The initial payment is being recognized as collaboration revenue over the expected performance period ending in March 2017.
- The award includes contingent royalty obligations upon commercialization, certain sales thresholds, licensing or transfer transactions, and change-of-control events. Potential payments could be substantial, including amounts described in the filing of up to $25 million, up to $5 million, and approximately $15 million depending on the triggering event.
- On July 27, 2015, the company issued a redemption notice for certain outstanding warrants. If all affected warrants were exercised by August 26, 2015, gross proceeds could be approximately $6.2 million, before a 5% solicitation fee payable to Aegis.
- Future financing may involve equity, convertible debt, other debt, collaborations, or third-party funding and could dilute existing stockholders, impose restrictive covenants, or require the company to relinquish valuable rights.
- Failure to obtain funding could require the company to delay, reduce, or eliminate clinical trials and other development activities.
- Key risks include clinical-trial execution, regulatory approval, intellectual-property protection, dependence on key personnel, limited operating history, continuing losses, uncertain financing availability, and the accuracy of expense and capital estimates.
- Future minimum rent commitments totaled $113,023 at June 30, 2015. The company reported no material off-balance-sheet arrangements and no legal proceedings.
- The company reported that there were no material changes during the quarter to the risk factors previously disclosed in its March 31, 2015 Form 10-Q.
Important Facts for Investors to Verify
- Whether the Cystic Fibrosis Foundation milestone payments are achieved and received on schedule.
- The number of warrants exercised before the August 26, 2015 redemption deadline and the resulting cash proceeds and share dilution.
- Resunab clinical-trial enrollment, timelines, costs, and regulatory outcomes in cystic fibrosis, systemic sclerosis, dermatomyositis, and other indications.
- The company’s post-quarter-end cash balance, operating cash burn, and updated financing runway.
- Additional financing requirements and the potential dilution or seniority associated with future securities.
- The terms and potential economic impact of contingent royalties and other obligations under the Cystic Fibrosis Foundation award.
- Reconciliation of the filing’s approximate MD&A working-capital and total-liability figures with the reported financial-statement balances.