Curis, Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unaudited consolidated results. Dollar amounts below are in millions unless otherwise noted.
Business context
Curis is a clinical-stage biotechnology company focused on cancer drug development. Its lead candidate is emavusertib, an IRAK4 inhibitor being studied in the TakeAim Leukemia and TakeAim Lymphoma Phase 1/2 trials. The company’s reported revenue is primarily royalties from Genentech and Roche’s sales of Erivedge; Curis does not expect direct product-sales revenue for several years, if ever. Other pipeline programs have been deprioritized to focus resources on emavusertib.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $2.197 | $2.393 | $4.494 | $4.450 |
| Research and development expense | $10.012 | $12.323 | $19.152 | $23.758 |
| General and administrative expense | $4.249 | $5.089 | $9.009 | $10.762 |
| Operating loss | $(12.138) | $(15.061) | $(23.765) | $(30.194) |
| Net loss | $(11.961) | $(15.940) | $(23.520) | $(32.049) |
| Basic and diluted loss per share | $(0.12) | $(0.17) | $(0.24) | $(0.35) |
- Q2 revenue fell 8% year over year, reflecting lower Erivedge sales; six-month revenue rose 1%. Six-month royalty revenue was $4.5 million in both years.
- Operating expenses declined, principally due to reduced headcount; six-month R&D was also lower because of reduced consulting, research and manufacturing costs, partly offset by higher clinical costs.
- Cash, cash equivalents and short-term investments totaled $63.5 million at June 30, 2023, excluding $0.6 million of restricted cash. Cash and cash equivalents alone were $19.8 million.
- Operating cash use was $20.1 million for the first half, versus $28.9 million in 2022. Investing activities provided $23.1 million, mainly from net investment maturities and sales; financing activities used $2.9 million, primarily for royalty-related payments.
- Total liabilities were $58.1 million, including a $46.2 million liability from the sale of future royalties and $3.4 million of operating lease liabilities. The filing does not report conventional borrowings as a separate debt balance.
- Stockholders’ equity was $26.2 million at June 30, down from $46.6 million at year-end 2022. The accumulated deficit was $1.2 billion.
Material changes and notable items
- Net loss improved 25% for Q2 and 27% for the first half versus the prior-year periods, despite lower Q2 revenue, mainly as operating expenses declined and interest income increased.
- In July 2023, after quarter-end, Curis sold 18,409,756 shares at $0.82 per share in a registered direct offering, generating approximately $13.9 million in net proceeds. The filing reported 117,704,554 common shares outstanding as of July 27, compared with 99,344,798 at June 30.
- The company had $93.7 million remaining available under its at-the-market sales agreement at June 30; it made no sales under that agreement during the first half.
Outlook, risks and contingencies
- Management estimated that June 30 liquidity plus the July offering proceeds should fund operations into 2025, but cautioned that this depends on assumptions and available capital could be exhausted sooner. The company expects continued operating losses and does not expect near-term profitability.
- Curis and its royalty subsidiary dispute allegations by Oberland-related parties of defaults under the royalty purchase agreement. The purchasers have not exercised the put option, but assert a right to require repurchase of purchased royalty receivables. The estimated put/call price was up to $68.0 million at June 30. Curis says an adverse outcome could materially harm the business and its ability to continue as a going concern.
- The FDA had imposed partial clinical holds on both emavusertib trials following a serious adverse event. The hold on the Lymphoma trial was lifted in August 2022; Curis announced in July 2023 that the hold on the Leukemia trial had also been removed. Future safety events, enrollment delays or additional regulatory requirements remain risks.
- Other significant risks include dependence on emavusertib, the need for additional financing, clinical and regulatory uncertainty, competition, and potential Nasdaq listing challenges. The company also cited possible strategic alternatives but gave no assurance that a transaction could be completed.
- Management reported disclosure controls and procedures were effective at the reasonable assurance level as of June 30, 2023, and no material change in internal control over financial reporting occurred during the quarter.
Important facts for investors to verify
- Progress, enrollment, safety findings and data from the TakeAim trials following removal of the Leukemia trial hold.
- Status and potential consequences of Oberland’s disputed default allegations, including possible exposure of up to $68.0 million.
- Actual cash burn and whether available funds support the stated runway into 2025, including the impact of clinical spending and any further financing.
- Erivedge royalty trends and the portion of royalty proceeds payable to Oberland under the royalty purchase agreement.
- Share-count changes and potential dilution from the July offering, future equity sales and outstanding equity awards.