Corbus Pharmaceuticals Holdings, Inc. quarterly report, Q1 FY2015

Corbus Pharmaceuticals Holdings, Inc. — Q1 2015 Form 10-Q Summary

Business context and reporting period

Corbus Pharmaceuticals is a clinical-stage biopharmaceutical company developing Resunab, an oral anti-inflammatory drug candidate for rare inflammatory-fibrotic diseases, including cystic fibrosis and scleroderma. The filing covers the three months ended March 31, 2015; financial statements are unaudited.

The company has no approved products or product revenue and has incurred recurring losses since inception. Resunab had completed Phase I safety studies. The FDA authorized the company to begin a Phase IIa scleroderma trial in March 2015, while the cystic fibrosis IND remained subject to FDA clearance.

Key financial metrics

Metric	Q1 2015	Q1 2014
Revenue	$0	$0
Research and development expense	$723,430	$61,917
General and administrative expense	$811,869	$43,728
Total operating expenses	$1,535,299	$105,645
Operating loss	$(1,535,299)	$(105,645)
Net loss	$(1,535,718)	$(115,979)
Basic and diluted loss per share	$(0.06)	$(0.02)
Net cash used in operating activities	$(1,279,950)	$(139,980)
Cash and cash equivalents at period end	$4,971,466	$163,040

The filing does not present a meaningful gross or operating margin because the company generated no revenue. Operating expenses were approximately 29% research and development and 53% general and administrative, with the remainder reflected in the reported total due to rounding.

Financial position, debt and liquidity

Total assets were $5.25 million and total liabilities were $554,774 at March 31, 2015.
Working capital was approximately $4.63 million, comprising current assets of $5.18 million less current liabilities of $554,774.
Accumulated deficit was approximately $5.96 million.
Notes payable totaled $72,487, all classified as current and payable during 2015.
Cash decreased by $1.29 million during the quarter. Operating cash use was $1.28 million, investing cash use was $1,727, and financing cash use was $9,302.
Management expected cash on hand to fund operating and capital requirements through at least the end of 2015, but stated that significant additional capital would be required to fund Resunab clinical trials.

Material changes versus the prior comparable period

R&D expense increased by approximately $661,000, primarily due to Resunab manufacturing, consulting, clinical trial, compensation, stock-based compensation and recruiting costs.
G&A expense increased by approximately $768,000, driven by new employee compensation, investor relations, legal and accounting costs, stock-based compensation, board costs and insurance.
Net loss increased to $1.54 million from $116,000, and operating cash use increased to $1.28 million from $140,000.
Cash and cash equivalents increased substantially year over year because of prior equity financing, but declined from $6.26 million at December 31, 2014 to $4.97 million at March 31, 2015.
Share-based compensation expense rose to $301,958 from $5,372, contributing materially to the increase in operating expenses but representing a non-cash charge.
Interest expense declined to $979 from $11,163. The prior-period warrant-liability fair-value gain did not recur; no derivative warrant liability remained at March 31, 2015.
Common shares outstanding increased to 26,003,304 from 25,938,332 at December 31, 2014, primarily from exercises of options and warrants that generated $62,600 in net proceeds.

Guidance, outlook, risks and unusual items

Management expects continuing and increasing operating losses for the foreseeable future as clinical development, manufacturing, regulatory, personnel and public-company costs rise. The company may never become profitable.
Future financing may include equity, preferred stock, convertible debt, credit facilities, other debt or collaborations. Financing may dilute existing holders, impose restrictive covenants or require the company to relinquish valuable rights, and may not be available on acceptable terms.
The company depends substantially on the successful development, regulatory approval and commercialization of Resunab, its only product candidate. Phase II clinical outcomes, FDA clearance, manufacturing, enrollment, intellectual-property protection and market acceptance remain uncertain.
On April 20, 2015, after quarter-end, the company entered into an award agreement with Cystic Fibrosis Foundation Therapeutics for up to $5 million to support a Phase II cystic fibrosis trial. The initial amount payable was $1.25 million, with the remainder tied to milestones. The arrangement includes potential royalty and other payments of up to specified amounts upon commercialization, certain sales thresholds, licensing, sale or change of control.
On April 16, 2015, the company began trading on the Nasdaq Capital Market under “CRBP,” having previously traded on the OTC.QB. The company abandoned its prior authorization for a reverse stock split.
The company had an operating lease with total future minimum rent commitments of $126,748 at March 31, 2015 and restricted cash of $13,730 supporting a landlord letter of credit.
Legal proceedings were reported as none, and management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.

Most important facts for investors to verify

Cash runway assumptions and the timing, size and terms of the next financing.
FDA status and enrollment progress for the Phase IIa scleroderma and cystic fibrosis trials.
Milestones, funding receipts, royalty obligations and termination provisions under the Cystic Fibrosis Foundation award.
Resunab clinical efficacy and safety data, manufacturing readiness and regulatory pathway.
Potential dilution from 13,647,848 outstanding warrants and 3,698,848 outstanding options at March 31, 2015.
Whether Nasdaq listing requirements and an adequate trading market can be maintained.
The company’s ability to control rapidly increasing R&D, G&A and stock-based compensation costs while remaining dependent on external capital.