Curis, Inc. — Q1 2018 Form 10-Q
Reporting period: Three months ended March 31, 2018; comparative period is Q1 2017. Curis is a clinical-stage biotechnology company developing cancer therapies. Its only marketed-product royalties are from Erivedge, commercialized by Genentech and Roche.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 / comparison |
|---|---|---|
| Total revenue | $2.47 million | $2.13 million; up 16% |
| Research and development expense | $8.27 million | $13.54 million; down 39% |
| General and administrative expense | $3.98 million | $3.53 million; up 13% |
| Operating loss | $9.91 million | $15.05 million |
| Net loss | $10.75 million; $0.07 per share | $15.74 million; $0.11 per share |
| Net cash used in operations | $9.96 million | $15.15 million |
| Cash, cash equivalents and investments | $48.45 million at March 31, 2018 | $60.23 million at December 31, 2017 |
| Debt | $39.75 million net carrying value; $40.1 million including accrued interest, per management | Debt is repaid from Erivedge royalty receipts |
Royalties were $2.47 million, up 13%, and accounted for essentially all revenue; research and development revenue was negative $6,000. Erivedge royalties are assigned to Curis Royalty’s HealthCare Royalty Partners loan and are expected to service interest and principal, rather than provide Curis with unrestricted operating cash. No product revenue from Curis’s own drug candidates is expected for several years, if ever. The filing does not provide a clear operating-margin metric.
At quarter-end, current assets were $51.85 million and current liabilities were $14.39 million. The company reported an accumulated deficit of $963.0 million. Cash and cash equivalents alone were $24.74 million. The company used $1.77 million in investing activities and $1.82 million in financing activities in Q1; cash and cash equivalents declined $13.55 million during the quarter.
Changes versus the prior period
- Revenue increased mainly because of higher Erivedge royalties.
- Research and development expense fell primarily because Q1 2017 included a $3.8 million Aurigene exclusivity payment, and because clinical costs for CUDC-907 and CA-170 declined; CA-4948 costs increased.
- General and administrative expense rose mainly due to legal, professional and consulting costs.
- Net loss narrowed by about 32%, while interest expense increased to $1.03 million from $0.66 million.
- Operating cash use improved by about $5.2 million year over year. In contrast to Q1 2017, Q1 2018 had no financing proceeds from the royalty loan or equity offerings.
Programs, outlook and notable risks
- CUDC-907: Phase 2 study ongoing in relapsed/refractory DLBCL, including MYC-altered disease; Curis was in discussions with the FDA about the most appropriate regulatory path.
- CA-170: Phase 1 study ongoing in advanced solid tumors and lymphomas. CA-4948: Phase 1 trial initiated in January 2018 in advanced non-Hodgkin lymphomas, including MYD88-altered disease.
- CA-327 was pre-IND; Curis expected to file an IND in 2018. In March, Curis exercised its option to license a fourth Aurigene immuno-oncology program.
- Curis chose not to pay the $10 million fee to continue broad immuno-oncology exclusivity with Aurigene in 2018. It retained program-specific exclusivity options for the IRAK4 and PD1/VISTA programs.
- Management said quarter-end cash, cash equivalents and investments were expected to fund planned operations into the second half of 2019. The notes also state the funds should cover at least the next 12 months from filing. Curis expects to need additional capital or debt in the future; financing may be unavailable or unfavorable, potentially forcing program delays, reductions or cancellations.
- Erivedge royalty rates and sales face competition from sonidegib; the competing product has already reduced Curis’s U.S. royalty rate. Lower royalties could also slow repayment of the royalty-backed debt, and unpaid interest may be added to principal if royalties are insufficient.
- All drug candidates remain in early clinical or preclinical development. Clinical, regulatory, manufacturing, intellectual-property, collaboration and financing risks could delay or prevent development or commercialization. Curis says it has never independently completed development of a drug candidate or achieved annual profitability.
- Nasdaq had notified Curis that its share price had remained below the $1.00 minimum bid requirement for 30 consecutive business days. The company had until July 2, 2018 to regain compliance; it reported no qualifying close above $1.00 through the filing date.
- Management assessed disclosure controls as effective and reported no material change in internal control over financial reporting. No off-balance-sheet arrangements or material changes to contractual obligations were reported.
Investor verification priorities
- Confirm the cash runway assumptions and the timing, amount and terms of any additional financing needs.
- Track enrollment, safety and efficacy data, FDA feedback and the CA-327 IND filing across Curis’s pipeline.
- Verify Erivedge sales and royalty trends, the effect of competition and the timing of repayment of the HealthCare Royalty Partners debt.
- Monitor Aurigene obligations, including remaining milestone and commercial-payment exposure for each licensed program.
- Check Nasdaq bid-price compliance and potential dilution: 165.6 million common shares were outstanding at April 27, 2018, with substantial options and restricted stock awards also outstanding.