Corbus Pharmaceuticals Holdings, Inc. — Q2 2023 Form 10-Q Summary
Business context and reporting period
Corbus is a precision oncology company developing CRB-701, a Nectin-4 antibody-drug conjugate, and CRB-601, an anti-integrin monoclonal antibody targeting TGFβ activation. The company also has the preclinical obesity program CRB-913 and is seeking partners to fund further development. The filing covers the three and six months ended June 30, 2023; financial statements are unaudited.
The company has not generated product revenue, has never been profitable, and remains dependent on additional capital. As of June 30, 2023, it had an accumulated deficit of approximately $418.6 million.
Financial results and liquidity
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Revenue | $0 | $0 |
| Research and development expense | $4.25 million | $17.64 million |
| General and administrative expense | $3.94 million | $7.85 million |
| Total operating expenses | $8.19 million | $25.49 million |
| Net loss | $8.78 million | $26.53 million |
| Net loss per share | $2.05 | $6.27 |
| Net cash used in operating activities | Not separately presented | $22.92 million |
There are no meaningful operating margins because the company has no revenue. Six-month operating loss was $25.49 million, compared with $20.86 million in the prior-year period. Net interest expense for the six months was $1.45 million.
At June 30, 2023, cash and cash equivalents were $8.35 million, investments were $28.22 million, and total cash, cash equivalents, investments, and restricted cash were approximately $37.24 million. Management separately states that cash, cash equivalents, and investments of approximately $36.57 million are expected to fund operations through the second quarter of 2024 based on current planned expenditures.
Working capital was approximately $21.89 million, based on current assets of $38.27 million and current liabilities of $16.39 million. Total debt had a net carrying value of approximately $18.34 million, including $7.02 million classified as current. The secured K2 loan matures August 1, 2024, bears interest at 13.5% as of June 30, 2023, and had principal and final payment obligations totaling approximately $20.72 million. Operating lease liabilities totaled approximately $5.33 million.
Material changes versus the prior comparable period
- Second-quarter R&D expense increased $1.75 million, or approximately 70%, to $4.25 million, primarily due to higher preclinical and clinical trial costs and consulting costs.
- Six-month R&D expense increased $11.85 million to $17.64 million, principally due to the $7.5 million CSPC license payment, a $1.2 million UCSF development milestone, and higher clinical, manufacturing, and consulting costs.
- Second-quarter G&A expense decreased $0.90 million to $3.94 million, and six-month G&A expense decreased $2.22 million to $7.85 million, primarily due to lower stock-based compensation, legal costs, insurance premiums, and consulting costs.
- The prior-year periods included a $5.0 million litigation settlement related to Venn Therapeutics; no comparable settlement expense was recorded in 2023.
- Six-month net loss increased from $22.69 million to $26.53 million despite lower G&A and the absence of the litigation settlement, reflecting substantially higher R&D spending.
- Cash, cash equivalents, and investments declined from approximately $59.20 million at December 31, 2022 to approximately $36.57 million at June 30, 2023.
- On June 1, 2023, K2 converted $875,000 of debt into 194,444 common shares at $4.50 per share. The company also sold 13,164 shares through its at-the-market facility for gross proceeds of approximately $107,000 during the quarter.
Guidance, outlook, risks, contingencies, and unusual items
- Management expects total 2023 expenses to remain generally consistent with 2022, with higher R&D expense as programs advance and lower legal and settlement costs.
- CRB-701 had received FDA IND clearance and was being studied in a Phase 1 trial in China. Corbus planned to bridge the data to support a U.S. clinical trial beginning in the first quarter of 2024.
- Corbus expected to submit an IND for CRB-601 in the fourth quarter of 2023 and anticipated starting a Phase 1 trial in the first half of 2024.
- Management concluded that there is substantial doubt about the company’s ability to continue as a going concern because existing resources are not sufficient to meet operating and capital requirements for at least twelve months from issuance of the filing. Additional financing is required to fund CRB-701 and CRB-601 trials.
- Potential financing sources include equity, convertible debt, other debt, collaborations, and grants. Financing may be unavailable or unfavorable and could dilute shareholders, impose restrictive covenants, or require relinquishing valuable rights.
- The CSPC license for CRB-701 includes a $7.5 million upfront payment, up to $130 million of development and regulatory milestones, up to $555 million of commercial milestones, and low-double-digit royalties. The company recorded the upfront payment as R&D expense in the first six months of 2023.
- Other license agreements contain potential milestone obligations of up to $18.4 million per compound under Jenrin, $53.0 million under Milky Way, and $153.15 million under UCSF, plus royalties and other contingent payments.
- The company disclosed a material weakness in internal control over financial reporting concerning the completeness, accuracy, and timeliness of accruals for upfront payments and issue fees in licensing agreements. Disclosure controls were not effective as of June 30, 2023; remediation efforts were underway.
- No material legal proceedings were pending as of the filing date. The filing states there were no material off-balance-sheet arrangements other than future license-related royalty and milestone obligations.
Most important facts for investors to verify
- Whether additional financing is secured before the projected cash runway ends in the second quarter of 2024, and the resulting dilution or financing terms.
- Progress, timing, and funding requirements for the planned CRB-701 and CRB-601 clinical programs.
- Ability to meet or refinance the K2 debt obligations, including the August 2024 maturity and high variable interest rate.
- Remediation and auditor or management assessments of the disclosed material weakness in internal controls.
- Accuracy of accrued clinical, licensing, and development obligations and any future milestone payments.
- Regulatory, clinical, manufacturing, intellectual-property, and partnership risks affecting CRB-701, CRB-601, and CRB-913.