CURIS INC quarterly report, Q1 FY2023

Business context and reporting period

Curis, Inc. is a clinical-stage biotechnology company focused on cancer drug development. This unaudited Form 10-Q covers the three months ended March 31, 2023, compared with the first quarter of 2022. Its lead candidate is emavusertib, an IRAK4 inhibitor; its principal reported revenue is royalties on Erivedge sales by Genentech and Roche.

Financial results and liquidity

At March 31, 2023, cash and cash equivalents were $31.7 million and short-term investments were $40.1 million, totaling $71.8 million; restricted cash of $0.6 million is excluded. Current assets were $78.0 million versus current liabilities of $8.1 million. The company reported total liabilities of $58.0 million, including a $47.4 million liability related to the sale of future royalties and operating lease liabilities. The filing does not identify conventional borrowings as a material balance-sheet item.

Cash and cash equivalents plus restricted cash increased $12.0 million during the quarter. Operating cash outflow was partly offset by $26.2 million of cash provided by investing activities, primarily net sales and maturities of investments; financing activities used $2.0 million, principally for royalty-related payments. The company reported an accumulated deficit of $1.2 billion and expects ongoing operating losses. No operating margin guidance was provided.

Material changes versus the prior comparable period

• Revenue increased by $0.2 million, attributed to higher Erivedge sales.
• Research and development expense declined $2.3 million, mainly due to the timing of manufacturing costs and lower employee costs following reduced headcount. General and administrative expense fell $0.9 million, also primarily reflecting lower employee costs.
• Net loss narrowed by $4.6 million. Interest income rose to $0.7 million from $0.1 million; expense related to the sale of future royalties declined to $0.6 million from $1.1 million.
• Operating cash use decreased by $4.6 million, reflecting lower research and development costs and payment timing.

Outlook, risks and unusual items

• Cash runway: Management says the $71.8 million of cash, cash equivalents and investments at quarter-end should fund operating expenses and capital expenditures into 2025 under its current plan. The filing also says this is expected to provide at least 12 months of funding from the filing date; both estimates depend on assumptions that may prove incorrect.
• Clinical development: The FDA partial clinical hold on the TakeAim Leukemia trial remained in place for its expansion and combination phases. Enrollment could resume at the 200 mg monotherapy dose level, but the hold remained pending completion of Phase 1a and FDA action. The partial hold on TakeAim Lymphoma was lifted in August 2022. Curis has prioritized emavusertib and reduced resources for other pipeline programs.
• Oberland dispute: In March 2023, Oberland-related parties alleged defaults under the royalty purchase agreement and asserted a potential right to require Curis Royalty to repurchase purchased receivables. Curis disputes the allegations; no put option had been exercised as of the filing. The estimated potential Put/Call Price was up to $72.5 million at March 31, 2023. If pursued and not successfully defended, the claims could materially harm the company and its ability to continue as a going concern.
• Financing and royalty dependence: Curis expects continued losses and may need substantial additional funding. Erivedge royalties are its principal expected operating cash source for the foreseeable future, and a significant portion is payable to the Oberland purchasers. The company may consider financing or strategic alternatives, but gives no assurance of obtaining them on acceptable terms.
• Nasdaq listing: The company transferred to the Nasdaq Capital Market effective April 24, 2023 and received until October 16, 2023 to regain compliance with the $1.00 minimum bid-price requirement. It said a reverse stock split may be needed; continued listing is not assured.

Important facts for investors to verify

1. Developments on the FDA partial clinical hold, trial progress, safety findings and clinical data for emavusertib.
2. Status and potential financial consequences of the Oberland allegations, including whether a put option is exercised and how the potential $72.5 million amount compares with available liquidity.
3. Actual cash burn, royalty receipts and whether the company’s runway estimate into 2025 remains supportable.
4. Progress toward Nasdaq bid-price compliance by October 16, 2023, and any reverse stock split or other listing action.
5. Potential dilution and financing capacity: $93.7 million remained available under the at-the-market sales agreement at March 31, 2023; no shares were sold under it in Q1 2023.