Curis, Inc. — FY2015 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2015; filed February 29, 2016. Curis is a clinical-stage oncology biotechnology company. Its only marketed product, Erivedge, is commercialized by Genentech/Roche; substantially all Curis revenue came from that collaboration.
Financial results and position
| Metric | 2015 | 2014 |
|---|---|---|
| Revenue | $7.88 million | $9.84 million |
| Operating loss | $56.48 million | $15.86 million |
| Net loss | $58.98 million | $18.73 million |
| Basic and diluted loss per share | $0.48 | $0.22 |
| Research and development expense | $26.70 million | $13.66 million |
| Operating cash flow | $(29.89) million | $(16.81) million |
- Royalties from Erivedge were $8.03 million, up 19%; total revenue fell 20%, chiefly because 2014 included a $3.0 million Genentech milestone/license payment not received in 2015. Curis reported no product sales.
- The 2015 operating loss included $24.35 million of in-process R&D expense associated with the Aurigene collaboration. Total costs and expenses were $64.36 million.
- At year-end, cash, cash equivalents and investments totaled $82.19 million, including $33.09 million cash and $49.10 million investments. Working capital was $74.74 million.
- Curis Royalty’s BioPharma-II loan had $24.50 million of principal and accrued interest outstanding at year-end and bears 12.25% interest. Erivedge royalties are applied to the loan; Curis estimated repayment in 2019, subject to royalty levels.
- Operating cash use was partly offset by $64.62 million net proceeds from a February 2015 public offering. Investing activities used $6.43 million; financing activities provided $61.66 million.
- No conventional profit margin is meaningful given the company’s losses and development-stage operations. Curis had an accumulated deficit of $838.54 million.
Material developments and comparison
- Net loss more than tripled year over year as R&D spending rose 95%, general and administrative expense rose 10%, and Curis recorded the Aurigene-related in-process R&D charge.
- Curis issued Aurigene 17.12 million shares valued at $23.97 million as part of the collaboration consideration, and issued 25.09 million shares in its public offering. Weighted-average shares rose to 123.37 million from 85.97 million in 2014.
- Erivedge royalties increased, but Novartis’s competing Hedgehog inhibitor sonidegib began selling in the U.S. in Q4 2015. Genentech reduced the U.S. royalty rate by two percentage points beginning that quarter.
- Curis licensed the PD-L1/VISTA and IRAK4 programs from Aurigene in October 2015, with candidates CA-170 and CA-4948. It also selected a third preclinical immuno-oncology program but had not exercised the license option by year-end.
- Curis regained rights to CUDC-305 after terminating its Debiopharm agreement. It completed CUDC-427 Phase 1 dose escalation but did not plan further company-funded trials, and was seeking partners for both assets.
- Q4 2015 revenue was $2.09 million and net loss was $13.46 million. The quarter’s loss included $7.0 million of Aurigene milestone and supplemental research payments.
Outlook, commentary and risks
- Management expected year-end resources to fund current and planned operations into 2017, but said additional capital would be required. No specific earnings or revenue guidance was provided.
- Curis expected to file an IND and begin Phase 1 testing of CA-170 in the first half of 2016 and CA-4948 in the second half. It initiated a Phase 2 CUDC-907 study in January 2016, after the fiscal year-end.
- Preliminary CUDC-907 Phase 1 results presented in December included 72 enrolled patients, among them 25 with relapsed/refractory DLBCL. Of 18 evaluable DLBCL patients, 3 had complete responses and 5 partial responses; no objective responses were observed in the multiple-myeloma patients treated with single-agent drug. These early results are not proof of efficacy in later trials.
- Reported CUDC-907 adverse events were commonly low-grade diarrhea, fatigue and nausea; dose-limiting toxicities included diarrhea and hyperglycemia on certain schedules. Curis reported no dose-limiting toxicity at its recommended Phase 2 dose.
- Major risks include continued losses and financing needs, clinical and regulatory uncertainty, dependence on Genentech/Roche and Aurigene, potential dilution, competition affecting Erivedge royalties, and reliance on third parties for manufacturing and trials. Aurigene obligations include up to $14 million in specified IND/Phase 1 milestones for the two licensed programs and a potential $7.5 million exclusivity fee estimated for early 2017.
- The filing reported no material legal proceedings or off-balance-sheet arrangements. The auditor gave an unqualified opinion and reported effective internal control over financial reporting.
Important facts for investors to verify
- Current cash runway, quarterly operating cash use, and financing needs relative to the stated runway into 2017.
- Progress, enrollment, safety and efficacy results from the CUDC-907 Phase 2 trial, including whether preliminary responses are confirmed.
- Whether CA-170 and CA-4948 IND filings and Phase 1 starts met the company’s stated 2016 timelines, and the associated Aurigene payments.
- Erivedge sales, royalty receipts and the effect of sonidegib competition on royalty rates and the estimated BioPharma-II repayment schedule.
- Further share issuance or other dilution, including use of the $30 million at-the-market offering facility, which had no sales through December 31, 2015.