Corvus Pharmaceuticals, Inc. — Q2 2019 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2019. Corvus is a clinical-stage oncology company with no product sales or product revenue; it reported operating losses and funded operations primarily through equity issuance. Financial statement amounts below are in millions of dollars unless otherwise stated.
Business context and pipeline
The company reported three clinical-stage candidates: ciforadenant, CPI-006 and CPI-818. Ciforadenant studies included single-agent and combination treatment; the Genentech Morpheus NSCLC study was in follow-up. CPI-006 was being studied alone and in combinations, and CPI-818’s Phase 1/1b trial in T-cell lymphomas began in March 2019. Management reported preliminary clinical observations, but emphasized that development remains early and success is uncertain.
Financial results and liquidity
| Metric | Three months ended June 30, 2019 | Three months ended June 30, 2018 | Six months ended June 30, 2019 | Six months ended June 30, 2018 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | $10.640 | $9.715 | $20.059 | $21.818 |
| General and administrative | $2.956 | $2.543 | $5.842 | $5.084 |
| Total operating expenses | $13.596 | $12.258 | $25.901 | $26.902 |
| Net loss | $12.978 | $11.631 | $24.621 | $25.932 |
| Basic and diluted loss per share | $0.44 | $0.40 | $0.84 | $1.01 |
For the first half, operating cash use was $18.204 million, compared with $21.934 million a year earlier. Investing activities provided $9.185 million, mainly from marketable-security maturities; financing provided approximately $0.006 million, versus $64.932 million in 2018, which included the follow-on offering. Cash and cash equivalents were $30.183 million and marketable securities $66.657 million at June 30, 2019, totaling $96.840 million, down from $114.597 million at December 31, 2018.
Total assets were $103.116 million, total liabilities $13.462 million and stockholders’ equity $89.654 million at June 30, 2019. Current assets were $98.145 million and current liabilities $10.702 million. The filing reports operating-lease liabilities of $3.580 million in total; it does not report material borrowings or other financial debt. Gross margin is not applicable because there was no revenue.
Material changes and unusual items
- Quarterly R&D expense rose $0.925 million year over year, including increased CPI-006 manufacturing and costs, while six-month R&D declined $1.759 million, primarily due to lower ciforadenant manufacturing and clinical-trial costs.
- G&A increased $0.413 million for the quarter and $0.758 million for the half year, mainly from personnel and professional-service costs.
- First-half net loss improved by $1.311 million year over year, while the second-quarter loss increased by $1.347 million.
- The company adopted ASC 842 lease accounting on January 1, 2019, recognizing a $2.634 million right-of-use asset and lease liabilities. The facility lease runs through February 2023.
- No shares were sold under the at-the-market program during the first half of 2019. The filing states cumulative sales of 52,569 shares for approximately $894,000 gross proceeds.
Outlook, risks and contingencies
Management believed available cash, cash equivalents and marketable securities would fund planned expenditures and obligations for at least 12 months from issuance of the financial statements. It also stated that existing resources would not fund completion of the clinical programs through commercialization and that additional capital would be needed. Management expects continued losses and increased R&D spending; no numerical revenue, earnings or expense guidance was provided.
Key risks include clinical-trial safety, efficacy, enrollment and timing; dependence on third-party manufacturers, CROs and collaborators; regulatory approval and commercialization uncertainty; and the possibility that additional financing may be unavailable or dilutive. The filing identifies potentially serious adverse events in ciforadenant combination studies and one Grade 3 anemia case in the CPI-006 trial; CPI-818 had limited follow-up and no serious adverse events reported to date. Potential license milestone and royalty obligations are contingent and not recorded as balance-sheet liabilities. The company reported no material legal proceedings and no off-balance-sheet arrangements. Management said disclosure controls were effective as of June 30, 2019, with no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether the company’s cash runway remains consistent with management’s at-least-12-month estimate, given planned trial and manufacturing spending.
- Upcoming clinical data, enrollment progress, safety findings and trial status for ciforadenant, CPI-006 and CPI-818.
- Future capital needs, use of the remaining ATM capacity, and potential dilution or partnership terms.
- Manufacturing supply and collaboration status, including the Genentech studies and license-related contingent milestones and royalties.
- How the newly recognized lease liabilities and other contractual commitments affect future cash requirements.