Corvus Pharmaceuticals, Inc. — Q2 2017 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2017. Corvus is a clinical-stage immuno-oncology company and has not generated product revenue.
Financial performance and position
| Metric | Q2 2017 | Six months 2017 | Comparable 2016 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $12.4 million | $25.9 million | $7.1 million; $12.5 million |
| General and administrative expense | $2.8 million | $5.5 million | $1.7 million; $2.7 million |
| Net loss | $15.0 million | $31.0 million | $8.6 million; $15.0 million |
| Basic and diluted loss per share | $0.73 | $1.52 | $0.43; $1.42 |
Operating margins are not meaningful because the company had no revenue. Q2 2017 operating expenses rose $6.3 million year over year; for the first half, they increased $16.1 million. Higher clinical trial and manufacturing costs, the $3.0 million Vernalis milestone, and increased personnel and public-company expenses contributed to the increases.
- Cash and investments: $110.3 million at June 30, 2017, comprising $34.1 million cash and cash equivalents and $76.2 million marketable securities, versus $134.9 million at December 31, 2016.
- Cash flow: First-half operating cash use was $24.5 million; investing activities provided $53.5 million, principally from marketable-security maturities; financing provided $8,000. Cash increased $29.0 million to $34.1 million, largely reflecting portfolio maturities and reinvestment activity.
- Balance sheet: Total assets were $115.5 million, total liabilities $10.7 million, and stockholders’ equity $104.8 million. The filing reports no material debt balance; current liabilities were $9.5 million.
- Accumulated deficit: $98.9 million at June 30, 2017. Management believes available cash and investments will fund planned expenditures and obligations for at least 12 months from issuance of the statements, but not completion of CPI-444 development through commercialization.
Material changes and business developments
- CPI-444, the lead oral A2A adenosine-receptor antagonist, remained in a Phase 1/1b trial as a single agent and with Genentech’s Tecentriq. The dose-selection portion enrolled 48 patients; expansion cohorts were enrolling at 36 medical centers, with three cohorts expanded from 14 to 26 patients and one from 26 to 48.
- In May 2017, Corvus and Genentech entered a second collaboration for a randomized, controlled Phase 1b/2 study of CPI-444 plus Tecentriq in up to 65 patients with anti-PD-(L)1-resistant or refractory second-line non-small cell lung cancer. Enrollment was expected to begin in Q4 2017. Genentech will conduct the study and the parties will share its costs; Corvus supplies CPI-444 and retains global development and commercialization rights.
- CPX-006, an anti-CD73 antibody, was in IND-enabling studies; Corvus planned to begin a Phase 1 trial in the first half of 2018. The ITK program was also in IND-enabling studies, with a Phase 1 start planned in 2018. The company expected to select an A2B antagonist development candidate in 2017.
- R&D expense growth included a $3.0 million Vernalis milestone payment in February 2017 following expansion of a renal-cell-cancer CPI-444 cohort, as well as higher CPI-444 trial costs and drug manufacturing costs for CPX-006 and ITK.
Outlook, risks and contingencies
- Management expects significant losses and rising R&D and administrative spending for the foreseeable future. Additional capital will be needed; equity or debt financing may dilute shareholders or impose repayment obligations and covenants, while collaborations could require relinquishing product rights. Financing may not be available on acceptable terms or at all.
- Clinical development remains early and uncertain. The filing reports two possibly drug-related serious adverse events in the CPI-444/Tecentriq dose-selection trial: Grade 3 autoimmune hemolytic anemia and Grade 4 aseptic meningoencephalitis. Both resolved after treatment discontinuation. Corvus cautions that combination treatment may produce immune-related or other unexpected toxicities.
- Key risks include trial enrollment, safety and efficacy outcomes, regulatory approval, manufacturing and third-party execution, competition, intellectual-property protection and dependence on licensed rights. The Vernalis agreement carries potential milestone payments exceeding $200 million across indications and tiered royalties; the Scripps agreement includes up to $2.6 million in potential milestones and low-single-digit royalties. These contingent amounts are not recorded as liabilities.
- Facility lease commitments totaled $4.2 million through 2021. The company reported no material legal proceedings, no off-balance-sheet arrangements, and no material changes to contractual obligations outside the ordinary course.
- Disclosure controls were deemed effective as of June 30, 2017, with no material change in internal control over financial reporting reported for the quarter.
Important facts for investors to verify
- Cash and investment balances, cash burn, and whether the stated 12-month funding runway remains adequate as trial and manufacturing spending progresses.
- Updated enrollment, timing, and clinical results for CPI-444, including the safety profile of the Tecentriq combination and the planned Q4 2017 NSCLC study.
- Progress and actual timing of CPX-006 and ITK IND-enabling work, and the planned 2018 Phase 1 trial starts.
- Future financing requirements, potential dilution or collaboration-related rights concessions, and Vernalis milestone and royalty obligations.