Corbus Pharmaceuticals Holdings, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2020; filed August 6, 2020. Corbus is a clinical-stage pharmaceutical company developing lenabasum for inflammatory and fibrotic diseases and CRB-4001 for fibrotic diseases. The interim financial statements are unaudited.
Financial performance and liquidity
| Metric | Three months ended June 30, 2020 | Three months ended June 30, 2019 | Six months ended June 30, 2020 | Six months ended June 30, 2019 |
|---|---|---|---|---|
| Revenue from awards and licenses | $0.3 million | $29.1 million | $2.0 million | $31.0 million |
| Research and development expense | $30.7 million | $22.2 million | $54.6 million | $44.0 million |
| General and administrative expense | $7.7 million | $5.2 million | $15.4 million | $11.8 million |
| Net income (loss) | $(38.1) million | $2.2 million | $(67.8) million | $(24.1) million |
| Net loss per share | $(0.52) | $0.03 | $(0.95) | $(0.38) |
- The company has no product-sales revenue. 2020 revenue principally reflects recognition of the Cystic Fibrosis Foundation award. Second-quarter 2019 revenue included the $27.0 million Kaken upfront payment.
- Operating loss was $38.1 million in the second quarter and $68.0 million for the first six months of 2020, compared with operating income of $1.7 million and an operating loss of $24.8 million, respectively, in the comparable 2019 periods.
- Research and development expense increased primarily because of higher clinical-trial and compensation costs. General and administrative expense also increased, including compensation, brand design and market research, stock-based compensation, legal and audit, facility and insurance costs.
- Net cash used in operating activities was $54.2 million for the six months ended June 30, 2020, compared with $6.1 million in 2019. Capital expenditures were $0.5 million.
- Financing activities provided $86.4 million, principally from equity offerings, compared with $37.7 million in 2019. Cash and cash equivalents were $63.5 million at June 30, 2020, versus $31.7 million at December 31, 2019.
- Working capital was approximately $45.9 million, based on current assets of $88.0 million and current liabilities of $42.1 million. Accumulated deficit was $260.6 million.
- Debt was limited at quarter-end to approximately $0.1 million of notes payable, plus operating lease liabilities of approximately $8.5 million. Total future operating lease payments were $10.9 million, before $2.4 million of imputed interest.
Material changes and financing
- Common shares outstanding increased to 80.7 million at June 30, 2020 from 64.7 million at December 31, 2019, primarily because of equity financings and option exercises.
- A February 2020 public offering generated $46.0 million of gross proceeds. Under the April 2020 at-the-market agreement, the company sold 8.1 million shares during the second quarter and reported approximately $43.7 million of proceeds received by June 30, plus a $16.7 million subscription receivable collected in July.
- In July 2020, the company sold an additional 1.1 million shares for approximately $8.1 million of net proceeds.
- On July 28, 2020, Corbus received $20.0 million under a secured K2 HealthVentures facility of up to $50.0 million. Additional $20.0 million and $10.0 million tranches depend on clinical and regulatory milestones. The facility matures August 1, 2024, bears interest at a variable rate with a minimum of 8.5%, and is secured by substantially all personal property other than intellectual property.
- On August 6, 2020, the company authorized a new at-the-market offering of up to $150 million of common stock.
Clinical programs, outlook and risks
- Lenabasum programs included an enrolled Phase 3 systemic sclerosis study with top-line data expected in summer 2020, an enrolled Phase 2b cystic fibrosis study with data expected by the end of the third quarter of 2020, an enrolled Phase 3 dermatomyositis study with data expected in the fourth quarter of 2021, and a Phase 2 systemic lupus erythematosus study expected to complete enrollment in early 2021.
- CRB-4001 was undergoing chronic pharmacokinetic studies in primates, with results expected in 2020 to inform Phase 1 study design.
- Management expects continuing and increasing operating losses and significant additional capital needs. Based on planned expenditures, management expected quarter-end cash, July financing proceeds, the CFF milestone payment, the initial K2HV tranche and the expected remaining CFF award to fund operations into the third quarter of 2021.
- The company received a $5.0 million CFF milestone payment in July 2020 and expected to receive the remaining approximately $2.5 million award before the end of the fourth quarter of 2020, subject to milestone achievement.
- Management concluded that substantial doubt exists regarding the company’s ability to continue as a going concern absent additional financing. Future equity or convertible-debt financing could dilute shareholders; debt or other funding could impose restrictive covenants or require surrender of valuable rights.
- COVID-19 may delay clinical-site initiation, patient recruitment, dosing, monitoring, manufacturing and drug distribution. NIH temporarily stopped enrollment in the SLE study, and one systemic sclerosis site withdrew from open-label participation because of COVID-19.
- The K2HV facility includes restrictive and financial covenants, including limitations on additional debt, liens, acquisitions, dispositions and other transactions, and cash-maintenance requirements if specified milestones are not achieved.
- The company had material weaknesses in internal control over financial reporting identified in its 2019 Form 10-K; disclosure controls and procedures were therefore not effective as of June 30, 2020. No material changes to internal controls were identified during the quarter.
- Potential obligations include CFF approval and sales royalties, Kaken-related royalties and milestones, and Jenrin development milestones and royalties. These obligations are contingent and may be substantial if products are approved, commercialized or transferred.
Most important facts to verify
- Whether lenabasum clinical readouts met the timelines stated in the filing and how COVID-19 affected enrollment, monitoring and trial completion.
- The company’s subsequent financing activity, including use of the remaining K2HV tranches and the $150 million August 2020 at-the-market facility.
- Actual cash burn and whether available cash extended beyond the stated third quarter 2021 estimate.
- Resolution of the disclosed material weaknesses in internal controls.
- Achievement and receipt of the remaining CFF milestones and the resulting royalty, warrant and repayment obligations.
- The filing text describes Corbus as both “clinical stage” and “Phase 3”; investors should verify the company’s current development-stage classification and program status.