Corvus Pharmaceuticals, Inc. — 2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018; filed March 7, 2019. This is an annual report, not a standalone Q4 filing. It also presents unaudited fourth-quarter results.
Business context
Corvus is a clinical-stage oncology biopharmaceutical company with no approved products or product sales. Its five programs include clinical-stage candidates CPI-444 (adenosine A2A receptor antagonist), CPI-006 (anti-CD73 antibody) and CPI-818 (ITK inhibitor), plus preclinical A2B receptor and myeloid-suppression programs. The company reports one operating segment.
Financial results and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $38.6 million | $46.3 million |
| General and administrative expense | $10.6 million | $10.2 million |
| Total operating expenses | $49.2 million | $56.5 million |
| Net loss | $46.9 million | $55.7 million |
| Net loss per share, basic and diluted | $1.71 | $2.72 |
| Cash used in operating activities | $41.0 million | $46.2 million |
| Cash, cash equivalents and marketable securities at year-end | $114.6 million | $90.1 million |
Fourth-quarter 2018 operating expenses were $11.2 million and net loss was $10.5 million, or $0.36 per share. No revenue or profit margin is reported; margins are not meaningful for this pre-revenue business.
At December 31, 2018, current assets were $115.6 million, current liabilities $7.0 million, working capital $108.6 million and stockholders’ equity $110.3 million. No material debt balance is reported. The company had a $0.1 million line of credit supporting a landlord letter of credit. Operating cash flow was negative; cash and securities increased year over year primarily following a $64.9 million net-proceeds follow-on equity offering. The company says existing resources should fund planned expenditures and obligations for at least 12 months from issuance of the statements, but not all programs through commercialization.
Changes and operating developments
- Net loss narrowed by $8.7 million year over year, as operating expenses fell $7.3 million and interest income and other expense, net, increased $1.4 million.
- R&D expense declined $7.7 million, chiefly because CPI-444 costs fell $12.8 million, including lower trial enrollment and the absence of the $3.0 million 2017 Vernalis milestone. CPI-818 expense rose $2.9 million as manufacturing and IND-enabling work advanced.
- Cash used in operations improved by $5.2 million. Cash and marketable securities rose by $24.5 million; the 2018 follow-on offering generated $64.9 million net proceeds.
- Shares outstanding rose to 29.3 million at year-end from 21.0 million a year earlier, reflecting the offering and option exercises.
Outlook, risks and contingencies
- Management planned to advance CPI-818 into a Phase 1/1b trial in T-cell lymphomas in March 2019, and to begin IND-enabling studies for the A2B antagonist and another antibody program during 2019. These are forward-looking plans, not assured outcomes.
- CPI-444 RCC data presented in November 2018 showed disease control lasting over six months in 35% of combination patients and 17% of monotherapy patients; reported progression-free survival was 5.9 and 4.0 months, respectively. These were early clinical findings, not confirmatory evidence. The filing reports possible or drug-related serious adverse events in combination treatment, including hemolytic anemia, encephalitis, hepatitis, pneumonitis, mucositis and dermatitis.
- CPI-006 was in Phase 1/1b testing; the company reported no dose-limiting toxicity to date and observed changes in lymphocyte activity and trafficking. Follow-up and patient numbers were limited.
- Corvus expects continued losses and substantial R&D spending and may need additional financing. Equity financing could dilute shareholders; debt could add repayment obligations and covenants; partnerships could require relinquishing product rights.
- Key risks include clinical-trial failure or delay, safety events, competition, reliance on contract manufacturers and trial providers, uncertain reimbursement, and intellectual-property and regulatory risks. The company relies on third parties for clinical and commercial manufacturing, including one supplier for CPI-006 drug substance.
- Contractual obligations include $4.9 million of operating lease payments through 2023. Contingent licensing milestones and royalties are excluded from that total; potential Vernalis milestones aggregate approximately $220 million, with additional Scripps milestones of up to $2.6 million.
- No material legal proceedings were reported. The auditor issued an unqualified opinion on the financial statements; auditor attestation of internal controls was not required under the company’s emerging-growth-company exemption.
Important facts for investors to verify
- Progress, enrollment, efficacy and safety updates for CPI-444 and CPI-006, including the durability and statistical reliability of reported results.
- Whether CPI-818 entered clinical testing as planned and whether the preclinical findings translate to human safety and efficacy.
- Cash burn, investment maturities and financing needs relative to management’s stated 12-month funding horizon.
- Potential dilution from future equity issuance and the status of the $125 million at-the-market sales program.
- Manufacturing supply concentration, license obligations and patent coverage, including contingent milestones and royalties.