Corbus Pharmaceuticals Holdings, Inc. — Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017, with unaudited fourth-quarter information. Corbus is a Phase 3 clinical-stage pharmaceutical company developing lenabasum, an oral CB2 agonist intended to resolve inflammation and fibrosis without immunosuppression. The company had no commercial product revenue and 47 full-time employees at year-end.
Business context and development status
- Lenabasum was being developed for systemic sclerosis, cystic fibrosis, dermatomyositis and systemic lupus erythematosus.
- A Phase 3 systemic sclerosis study, RESOLVE-1, was initiated in December 2017; the first patient was dosed in January 2018. The study was expected to enroll approximately 354 subjects, with top-line data targeted for the first half of 2020.
- A Phase 2b cystic fibrosis study was initiated in January 2018, targeting approximately 415 subjects and supported by a potential $25 million Cystic Fibrosis Foundation award.
- A Phase 2 systemic lupus erythematosus study was initiated in December 2017, with patient dosing beginning in February 2018 and expected enrollment of approximately 100 subjects.
- The company reported positive Phase 2 results in systemic sclerosis, cystic fibrosis and dermatomyositis. Lenabasum had U.S. and European orphan designation and U.S. Fast Track status for systemic sclerosis and cystic fibrosis.
Financial performance and position
| Metric | 2017 | 2016 | Change |
|---|---|---|---|
| Revenue from awards | $2.44 million | $1.91 million | Up $0.53 million |
| Research and development expense | $26.04 million | $15.44 million | Up $10.60 million |
| General and administrative expense | $8.96 million | $6.46 million | Up $2.50 million |
| Total operating expenses | $35.00 million | $21.90 million | Up $13.11 million |
| Operating loss | $32.56 million | $19.99 million | Loss increased $12.58 million |
| Net loss | $32.42 million | $20.00 million | Loss increased $12.42 million |
| Basic and diluted loss per share | $0.65 loss | $0.49 loss | Loss per share increased |
| Net cash used in operating activities | $27.80 million | $13.57 million | Use increased $14.23 million |
- Revenue consisted of amortization of Cystic Fibrosis Foundation development-award funding; Corbus had not generated revenue from product sales.
- Fourth-quarter 2017 revenue from awards was zero. Fourth-quarter R&D expense was $8.29 million, G&A expense was $2.58 million and net loss was $10.69 million, or $0.20 per share.
- Cash and cash equivalents were $62.54 million at December 31, 2017, compared with $14.99 million at December 31, 2016. Including restricted cash, year-end cash resources were $62.70 million.
- Working capital was $57.30 million, compared with $8.50 million in 2016. Total assets were $66.98 million and total liabilities were $9.19 million.
- Debt was limited: notes payable were $0.33 million at year-end, with a $0.42 million insurance-financing loan entered into in November 2017. The company reported no material off-balance-sheet arrangements.
- Cash provided by financing activities was $76.01 million, primarily from equity offerings. The company raised approximately $27.18 million net in a February 2017 registered direct offering, $13.40 million under an at-the-market facility and $35.18 million net in an October 2017 offering.
- Stock-based compensation expense was $5.69 million in 2017, compared with $3.16 million in 2016.
Material changes versus the prior comparable period
- R&D spending increased 69%, primarily due to approximately $6.58 million of additional clinical-trial costs, $2.65 million of additional compensation and $1.38 million of additional stock-based compensation.
- G&A spending increased 39%, driven by higher stock-based compensation, compensation, investor-relations and public-company costs, recruiting and insurance expenses.
- Net loss increased from $20.00 million to $32.42 million as clinical development activity expanded.
- Cash increased substantially because equity financing proceeds more than offset operating and investing cash uses. Common shares outstanding increased from 44.68 million at December 31, 2016 to 55.60 million at December 31, 2017.
- The 2015 Cystic Fibrosis Foundation award was fully recognized by the third quarter of 2017, and deferred revenue declined from $1.94 million at year-end 2016 to zero.
- The company entered into a lease for 32,733 square feet of office space beginning in February 2018. Total future operating-lease payments were $5.47 million.
Liquidity, outlook and unusual items
- Management expected operating losses and expenses to increase substantially as systemic sclerosis, cystic fibrosis, dermatomyositis and lupus programs progressed.
- After year-end, Corbus entered into a $50 million at-the-market equity facility and had received approximately $11.3 million in net proceeds from the sale of 1.5 million shares.
- After year-end, the company received $6.25 million under the potential $25 million 2018 Cystic Fibrosis Foundation award. Remaining amounts are milestone-dependent.
- Management stated that year-end cash, post-year-end equity proceeds and expected CFF funding were expected to fund operations through the fourth quarter of 2019 based on planned expenditures. The filing also states that additional capital will be needed.
- The CFF arrangements include potential approval royalties, sales royalties and other payments if lenabasum is commercialized, licensed, sold or involved in a change-of-control transaction.
- Lenabasum was classified as a Schedule I controlled substance in the United States, creating additional DEA licensing, quota, security, recordkeeping, import and export requirements.
- The company depends on third-party manufacturers, contract research organizations and clinical sites. Delays, quality issues, regulatory holds or failure to obtain approvals could materially affect development timelines and liquidity.
- Key risks include dependence on a single product candidate, clinical-trial failure, regulatory non-approval, inability to raise capital, dilution from future equity issuance, manufacturing dependence, intellectual-property challenges, reimbursement uncertainty and competition.
- The company reported no material legal proceedings. Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2017; the auditor did not provide an internal-control attestation because Corbus was an emerging growth company.
Investor verification points
- Verify the enrollment, execution and results timelines for RESOLVE-1 and the Phase 2b cystic fibrosis and lupus studies.
- Confirm the amount and timing of remaining CFF award payments and the associated royalty and warrant terms.
- Reconcile post-year-end equity issuance, dilution, cash runway and the remaining capacity under the $50 million at-the-market facility.
- Assess whether operating cash burn and clinical-trial spending remain consistent with management’s projected funding runway through the fourth quarter of 2019.
- Review the regulatory implications of lenabasum’s Schedule I classification and the status of DEA licenses, quotas and site registrations.
- Evaluate whether positive Phase 2 results are supported by adequately powered later-stage trials and whether safety and efficacy results remain consistent.
- Review patent validity and exclusivity through February 2034, as well as potential third-party intellectual-property claims.
- Consider dilution from 7.84 million outstanding options, 1.29 million outstanding warrants and the 1.0 million-share CFF warrant issued in January 2018.