Corbus Pharmaceuticals Holdings, Inc. — Fiscal 2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. The filing is an annual Form 10-K, not a standalone quarterly report, although fourth-quarter revenue of $1.9 million is disclosed in the notes.
Business Context
Corbus is a Phase 3 clinical-stage pharmaceutical company developing cannabinoid-based therapies for chronic inflammatory and fibrotic diseases. Its lead candidate, lenabasum, is an oral CB2 agonist intended to resolve inflammation and fibrosis without immunosuppression. Programs target systemic sclerosis, cystic fibrosis, dermatomyositis and systemic lupus erythematosus.
- Lenabasum was in Phase 3 development for systemic sclerosis and dermatomyositis, Phase 2b development for cystic fibrosis, and Phase 2 development for systemic lupus erythematosus.
- Corbus licensed more than 600 cannabinoid compounds from Jenrin Discovery in September 2018. The pipeline includes CRB-4001, for which Corbus expected to initiate a Phase 1 study by the end of 2019.
- The company had 77 full-time employees at December 31, 2018 and had no approved products or product sales.
Financial Performance and Position
| Metric | 2018 | 2017 | Change |
|---|---|---|---|
| Revenue from awards | $4.8 million | $2.4 million | Increased $2.4 million |
| Research and development expense | $48.6 million | $26.0 million | Increased $22.6 million |
| General and administrative expense | $13.0 million | $9.0 million | Increased $4.0 million |
| Total operating expenses | $61.6 million | $35.0 million | Increased $26.6 million |
| Operating loss | $56.7 million | $32.6 million | Worsened $24.2 million |
| Net loss | $55.7 million | $32.4 million | Worsened $23.3 million |
| Basic and diluted loss per share | $0.98 | $0.65 | Loss per share increased |
| Cash and cash equivalents at year-end | $41.7 million | $62.5 million | Decreased $20.8 million |
| Accumulated deficit | $121.4 million | $65.7 million | Increased $55.7 million |
- Revenue consisted entirely of development-award revenue, primarily from the 2018 Cystic Fibrosis Foundation award; Corbus reported no product revenue.
- Research and development expense increased primarily because of higher clinical-trial costs, compensation and stock-based compensation.
- Net cash used in operating activities was $30.1 million, compared with $27.8 million in 2017. Cash used in investing activities was $2.3 million, primarily for office construction, furniture and fixtures.
- Financing activities provided $11.4 million, including approximately $11.2 million of net proceeds from the sale of 1.5 million shares under an at-the-market offering.
- Working capital was $26.2 million, based on current assets of $44.2 million and current liabilities of $18.1 million.
- Debt was limited: notes payable were $394,000 at year-end, primarily related to insurance financing. The company had no material long-term debt disclosed.
- Non-cash stock-based compensation was $7.6 million, compared with $5.7 million in 2017.
Material Changes Versus 2017
- Clinical development spending accelerated substantially as systemic sclerosis, cystic fibrosis, dermatomyositis and lupus programs advanced.
- Corbus initiated the Phase 2b cystic fibrosis study in January 2018 and commenced the Phase 3 dermatomyositis study in December 2018.
- The company adopted ASC 606 in 2018. Revenue recognized under the 2018 CFF award was $4.8 million for the year, with $1.5 million of related deferred revenue remaining at year-end.
- Corbus recorded a $250,000 research and development expense for the upfront payment under the Jenrin license and recognized the $6.2 million fair value of a warrant issued to CFF in additional paid-in capital.
- Cash declined as operating and development spending exceeded award proceeds and equity financing.
- Shares outstanding increased to 57.2 million at December 31, 2018 from 55.6 million at December 31, 2017. Options and warrants represented potential additional dilution.
Guidance, Outlook, Risks and Unusual Items
- Management expected expenses and operating losses to increase substantially as clinical trials, manufacturing preparation, regulatory work, staffing and commercialization activities expanded.
- Based on planned expenditures, management expected year-end 2018 cash, the Kaken upfront payment, net of the CFF royalty, and proceeds from the January 2019 offering to fund operations into the fourth quarter of 2020.
- After year-end, Corbus entered into a Japan collaboration with Kaken. The agreement provides for a $27 million upfront payment, up to approximately $173 million in development, regulatory and sales milestones, and double-digit royalties. Corbus expected to recognize the upfront payment in the first quarter of 2019.
- Corbus completed a January 2019 public offering of 6,198,500 shares at $6.50 per share, generating gross proceeds of $40.3 million and estimated net proceeds of approximately $37.6 million.
- The company remains dependent on additional capital and may need to delay, reduce or discontinue clinical activities if financing is unavailable.
- Lenabasum was classified as a Schedule I controlled substance in the United States, creating DEA licensing, quota, manufacturing, security, import and export requirements. Rescheduling would be required before U.S. commercial sales if the drug is approved.
- Corbus relies on third-party contract manufacturers, CROs and clinical sites, including single suppliers for certain lenabasum materials and finished product. Manufacturing, enrollment, regulatory or data-quality failures could materially delay development.
- Clinical efficacy and safety remain unproven in pivotal studies. Positive Phase 2 results may not predict Phase 3 outcomes or regulatory approval.
- The CFF award carries potential future approval royalties equal to 1.5 times the award amount upon U.S. approval and another 1.5 times upon approval in another major market. Corbus also owes CFF 10% of the Kaken upfront payment, or $2.7 million.
- The February 2019 lease amendment expanded planned office space to 62,756 square feet and increased estimated future minimum rent commitments to approximately $11.9 million.
Most Important Facts for Investors to Verify
- Enrollment, timing and results of the Phase 3 systemic sclerosis and dermatomyositis trials and the Phase 2b cystic fibrosis trial.
- Whether the Phase 2 lupus program and planned CRB-4001 Phase 1 study remain adequately funded and on schedule.
- Receipt and accounting treatment of the $27 million Kaken upfront payment, related $2.7 million CFF royalty and any future milestone payments.
- Actual cash runway relative to management’s projection through the fourth quarter of 2020 and the timing of additional financing needs.
- Potential dilution from the January 2019 offering, outstanding options, warrants and the CFF warrant for up to 1.0 million shares.
- Regulatory status of lenabasum, including FDA requirements, DEA scheduling and any clinical holds or requests for additional studies.
- Terms and execution of the expanded lease, contract manufacturing arrangements and remaining CFF and Jenrin milestone or royalty obligations.