Curis, Inc. — FY2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017. The filing was signed March 8, 2018. Curis is a clinical-stage biotechnology company focused on cancer drug development; substantially all FY2017 revenue came from royalties under its Genentech/Roche collaboration for Erivedge. Curis has no internally developed commercial product and depends on collaborators for Erivedge sales.
Financial results and liquidity
| Metric | FY2017 | FY2016 | Change |
|---|---|---|---|
| Revenue | $9.9 million | $7.5 million | Up 31%; primarily higher Erivedge royalties |
| Research and development expense | $45.1 million | $31.6 million | Up 43% |
| General and administrative expense | $14.1 million | $15.6 million | Down 10% |
| Operating loss | $49.8 million | $58.0 million | Loss narrowed |
| Net loss | $53.3 million | $60.4 million | Loss narrowed 12% |
| Net loss per share, diluted | $0.36 | $0.45 | Loss per share narrowed |
| Cash used in operating activities | $48.4 million | $35.8 million | Cash use increased |
FY2017 revenue was $9.85 million in royalties, with $0.05 million of net research and development revenue. Royalty cost was $0.50 million; the filing does not present a conventional consolidated gross margin. R&D growth reflected clinical program spending, including CA-170 activity, and $7.5 million of Aurigene exclusivity payments. FY2016 included $18.0 million of in-process R&D expense related to Aurigene; FY2017 included none, contributing to the lower reported net loss.
At year-end, cash and cash equivalents were $38.3 million and investments were $21.9 million, totaling $60.2 million; working capital was $50.2 million. Total assets were $73.8 million and stockholders’ equity was $24.0 million. Debt carrying value was $41.6 million, including $5.9 million current and $35.7 million long-term; Curis Royalty reported $41.9 million of principal and accrued interest owed to HealthCare Royalty. Contractual debt payments, including estimated interest, were $56.4 million, based on management’s royalty assumptions.
Management said existing cash and investments should fund planned operations into the second half of 2019, but additional capital or debt will be required. The auditor highlighted the need for additional financing. Erivedge royalties are pledged to service Curis Royalty’s debt and are expected to be applied to debt repayment for the foreseeable future, limiting their availability to fund Curis’s operations. FY2017 financing included $35.3 million net from a public stock offering and $6.2 million net from at-the-market sales.
Material changes and operating developments
- Erivedge royalty revenue increased to $9.8 million from $7.8 million in 2016. A competing Hedgehog inhibitor, Odomzo, triggered a 2 percentage-point U.S. royalty-rate reduction beginning in late 2015; competition may also weigh on Erivedge sales.
- Curis refinanced the royalty-backed loan in March 2017 with a $45.0 million HealthCare Royalty loan at 9.95%, repaid $18.4 million of the prior facility, and received $26.6 million in residual proceeds. The debt’s repayment period depends on Erivedge royalties and is estimated by management to extend to 2023; actual timing may differ materially.
- Curis issued 20 million shares in its September 2017 offering and sold additional shares through its ATM program. Outstanding shares increased during the year; dilution remains a financing risk.
- Curis elected not to pay $10.0 million to continue broad immuno-oncology exclusivity with Aurigene in 2018. It retained program-specific exclusivity options for IRAK4 and PD1/VISTA programs and licensed a fourth Aurigene program in March 2018.
Pipeline, outlook, and risks
- CUDC-907: Phase 2 study ongoing in relapsed/refractory DLBCL, including MYC-altered disease; a separate Phase 1 study evaluates solid tumors with MYC involvement. Combined Phase 1 and interim Phase 2 results reported an objective response rate of 23% (14/60) in MYC-altered patients, with median response duration of 13.6 months. These are interim/combined results, not proof of approval or commercial benefit. Curis was discussing the appropriate regulatory path with the FDA.
- CA-170: Phase 1 study ongoing in advanced solid tumors and lymphomas. Preliminary 2017 data indicated dose-proportional pharmacokinetics, immune-cell activation signals, and tumor shrinkage in some patients; the company reported tolerability up to 800 mg once daily as of December 2017. These early findings do not establish efficacy. Aurigene began a Phase 2 trial in India in early 2018.
- CA-4948: Curis initiated a Phase 1 trial in January 2018 for advanced non-Hodgkin lymphomas, including MYD88-altered disease.
- CA-327: In IND-enabling studies; Curis expected to file an IND in 2018. The fourth Aurigene program was licensed in March 2018, after the fiscal year-end.
- Curis expects substantial continuing operating losses and increased development spending. Its pipeline remains early stage, and the company has never obtained marketing approval for a drug candidate of its own. Clinical failure, delays, regulatory decisions, trial enrollment, manufacturing reliance, competition, reimbursement, intellectual-property protection, and the need for financing are material risks.
- Aurigene obligations include up to $42.5 million per licensed program in remaining regulatory and commercial milestones, plus potential royalties and other contingent payments. Amounts and timing depend on future events.
- Nasdaq notified Curis in January 2018 that its share price had remained below the $1.00 minimum bid requirement for 30 consecutive business days; the initial compliance period ran through July 2, 2018. The filing also reports no material legal proceedings and effective internal controls.
Most important facts for investors to verify
- Current cash runway, expected operating burn, and the timing and terms of any additional financing; assess potential dilution and whether the stated runway assumptions remain valid.
- Erivedge sales, royalty rates and receipts, the impact of Odomzo and other competition, and whether the pledged royalty stream can service the $41.9 million royalty-backed debt as projected.
- Updated clinical-trial enrollment, final and complete CUDC-907 and CA-170 data, safety findings, and FDA feedback on CUDC-907’s regulatory path.
- Progress, cost and milestone obligations for CA-4948, CA-327 and the fourth Aurigene program, including the effect of ending broad collaboration exclusivity.
- Nasdaq listing compliance and changes in shares outstanding, including future equity issuance and stock-option dilution.