Cue Biopharma, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Financial statements are unaudited. Amounts below are in U.S. dollars; financial figures are in millions unless noted.
Business context
Cue is a clinical-stage biopharmaceutical company developing Immuno-STAT T-cell engager biologics. It has no commercial product revenue and is prioritizing oncology programs in its IL-2-based CUE-100 series. Its two clinical-stage candidates were CUE-101 and CUE-102; it is seeking external support for programs outside oncology.
Key financial metrics
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Collaboration revenue | $0.068 | $2.395 | $1.094 | $6.687 |
| Research and development expense | $7.571 | $11.288 | $27.246 | $29.846 |
| General and administrative expense | $3.528 | $4.125 | $12.465 | $12.660 |
| Operating loss | $(11.031) | $(13.018) | $(38.359) | $(35.819) |
| Net loss | $(10.955) | $(12.993) | $(38.418) | $(35.777) |
| Loss per share, basic and diluted | $(0.31) | $(0.41) | $(1.11) | $(1.16) |
The company reported no product sales; collaboration revenue is not a product-sales base for assessing commercial margins. The filing does not provide a meaningful gross-margin measure.
- Liquidity at September 30: Cash and cash equivalents of $29.726 million plus marketable securities of $29.457 million, or $59.183 million combined. Current assets were $61.700 million and current liabilities $10.222 million.
- Cash flow, nine months: Operating cash use was $31.292 million; investing cash use was $29.609 million, primarily purchases of short-term investments; financing provided $26.256 million, including $16.598 million net ATM proceeds and $10.000 million term-loan proceeds. Cash, cash equivalents and restricted cash decreased $34.645 million.
- Debt: $10.0 million principal drawn from Silicon Valley Bank; net debt carrying value was approximately $9.956 million, including current and long-term portions. The floating interest rate was 8.5% at September 30. Principal payments were scheduled to begin June 2023, subject to extension if contingent loan tranches are drawn.
- Equity: 35.386 million common shares were outstanding at September 30. The company sold 3.117 million shares through its ATM in the first nine months for approximately $16.598 million net.
Changes versus the prior comparable period
- Collaboration revenue fell by $2.327 million in Q3 and $5.593 million for the nine-month period. The Merck research term had ended in December 2021, and the LG Chem research phase was substantially complete by March 2022.
- Q3 operating and net losses narrowed year over year, mainly as R&D spending decreased $3.717 million and G&A decreased $0.597 million.
- For the nine months, operating loss widened $2.540 million and net loss widened $2.641 million, despite lower operating expenses, because the decline in collaboration revenue exceeded the expense reduction.
- Nine-month R&D expense declined $2.600 million, principally from lower laboratory, manufacturing, stock-compensation, professional and licensing costs, partly offset by higher clinical-trial spending for CUE-101 and CUE-102.
- The company recorded $0.092 million of unrealized losses on available-for-sale securities in 2022. A $0.258 million gain from terminating a Cambridge lease benefited nine-month operating results.
Outlook, management commentary and risks
- Management said September 30 cash, cash equivalents and marketable securities were expected to fund operations for at least 12 months from issuance of the statements. This estimate depends on assumptions and management also said additional capital will be needed over time.
- On November 14, 2022, after quarter-end, Cue agreed to a private placement expected to generate approximately $30 million gross, before fees and expenses, subject to customary closing conditions. The transaction included common shares, pre-funded warrants and accompanying warrants; exercise could materially dilute existing holders.
- For CUE-101 monotherapy, management reported one confirmed partial response lasting more than 42 weeks and seven patients with durable stable disease among 19 evaluable patients at the 4 mg/kg recommended Phase 2 dose as of September 23. Estimated median overall survival was 13.3 months; follow-up was ongoing and management anticipated more mature data by year-end 2022.
- CUE-101 received FDA Fast Track Designation on October 3, 2022 for recurrent/metastatic HPV-positive head and neck cancer, as monotherapy and with pembrolizumab. Management planned to define a potential monotherapy registration trial in mid-2023 after reviewing the full data set.
- For the CUE-101/pembrolizumab combination, management described preliminary results from a small early-stage cohort: two confirmed and two initially unconfirmed partial responses among the first 10 evaluable patients at the recommended dose; the two unconfirmed responses were subsequently confirmed. Preliminary response data on 20 patients were anticipated by the end of Q2 2023. These are early, non-pivotal findings.
- CUE-102’s IND was accepted in April 2022 and a Phase 1 monotherapy dose-escalation trial had begun; management anticipated dose-escalation data in mid-2023. These are company expectations, not guaranteed outcomes.
- Management cited clinical and regulatory uncertainty, dependence on third-party trial operators and manufacturers, possible COVID-related supply-chain or CRO delays, competition, and the need for additional financing. The SVB loan is secured by substantially all company assets other than intellectual property, which is subject to a negative pledge, and includes operating covenants.
- The company has a history of operating losses, no approved or commercialized products, and may never become profitable. It reported no material legal proceedings and no accrued contingent liabilities.
Important facts for investors to verify
- Updated CUE-101 monotherapy survival, response durability and safety results, including the completeness and maturity of the reported dataset.
- Subsequent CUE-101 combination-trial results and whether larger studies confirm the preliminary response findings.
- Actual timing, net proceeds, closing and dilution from the November 2022 private placement and any warrant exercises.
- Cash burn, financing needs and runway relative to clinical-trial plans, plus compliance with SVB covenants and future debt payments.
- Progress and costs for CUE-102, the company’s ability to secure external support for non-oncology programs, and any changes to development priorities.