Corbus Pharmaceuticals Holdings, Inc. — FY2015 Form 10-K Summary
Business context and reporting period
Annual report for the fiscal year ended December 31, 2015, filed March 28, 2016. Corbus is a clinical-stage pharmaceutical company with no approved products or product sales. Its principal candidate, Resunab, is an oral CB2 agonist intended to resolve inflammation and reduce fibrosis without immunosuppression.
During 2015, Resunab was in Phase 2 development for cystic fibrosis, diffuse cutaneous systemic sclerosis, and skin-predominant dermatomyositis. The company also planned a Phase 2 systemic lupus erythematosus study for the first quarter of 2017. Resunab had Orphan Drug Designation and Fast Track status for cystic fibrosis and systemic sclerosis.
Financial performance and position
| Metric | 2015 | 2014 |
|---|---|---|
| Collaboration revenue | $648,382 | None |
| Research and development expense | $5.889 million | $1.256 million |
| General and administrative expense | $3.613 million | $1.392 million |
| Operating loss | $8.854 million | $2.647 million |
| Net loss | $8.851 million | $2.540 million |
| Basic and diluted loss per share | $0.28 | $0.13 |
| Net cash used in operating activities | $4.647 million | $2.361 million |
| Cash and cash equivalents at year-end | $12.338 million | $6.262 million |
| Total debt at year-end | $162,019 | $144,389 |
Operating expenses increased substantially as the company advanced three Phase 2 programs. The filing does not provide a meaningful operating or gross margin because the company has no product sales and only limited collaboration revenue. Stock-based compensation was $1.153 million in 2015 versus $193,120 in 2014.
At December 31, 2015, total current assets were $12.715 million, current liabilities were $3.630 million, working capital was $9.085 million, total assets were $12.875 million, total liabilities were $3.890 million, and stockholders’ equity was $8.985 million. Deferred revenue was $1.852 million, including $1.591 million classified as current.
Financing activities provided $10.837 million, primarily from common-stock and warrant exercises. Investing activities used $114,037, primarily for property and equipment. The company had no material off-balance-sheet arrangements.
Material changes versus the prior comparable period
- Collaboration revenue increased from zero to $648,382, reflecting amortization of a Cystic Fibrosis Foundation Therapeutics award.
- Research and development expense increased by approximately $4.633 million, primarily because of staffing, clinical operations, clinical trials, manufacturing, and regulatory costs.
- General and administrative expense increased by approximately $2.221 million, driven by stock-based compensation, public-company costs, insurance, recruiting, consulting, and legal expenses.
- Net loss increased by approximately $6.310 million, and accumulated deficit reached approximately $13.278 million.
- Cash increased by approximately $6.076 million, principally because equity and warrant financing exceeded operating and investing cash uses.
- Common shares outstanding increased to 37.605 million at year-end from 25.938 million at year-end 2014. Outstanding options and warrants totaled approximately 5.951 million shares at December 31, 2015.
- The common stock began trading on the Nasdaq Capital Market in April 2015, after previously trading on the OTC.QB.
Funding, outlook, risks, and unusual items
Management expected year-end cash to fund operations and capital requirements into at least the fourth quarter of 2016. The company stated that it would need significant additional financing and could pursue equity, convertible debt, other debt, grants, or collaborations. The independent auditor included a going-concern explanatory paragraph because of recurring losses and the company’s dependence on additional financing.
The Cystic Fibrosis Foundation award provides up to $5 million. Corbus received $2.5 million during 2015, recorded $648,382 as revenue, and held $1.852 million as deferred revenue at year-end. The remaining $2.5 million is contingent on future clinical milestones. The award also creates potential royalty or other payment obligations upon commercialization, specified sales levels, licensing, transfer, or a change in control.
Management expected the cystic fibrosis and systemic sclerosis studies to report data by the end of 2016 and the dermatomyositis study during the first half of 2017. The planned SLE study was expected to enroll approximately 100 patients and was selected for NIH funding, as disclosed in a March 2016 subsequent event.
- Resunab was the company’s only product candidate, and it had not demonstrated efficacy in Phase 2 trials or received regulatory approval.
- Clinical development, regulatory approval, manufacturing, enrollment, safety, efficacy, and commercialization remain uncertain.
- Resunab was classified as a Schedule I controlled substance in the United States, creating DEA licensing, quota, security, recordkeeping, import, export, and state-registration requirements.
- The company relied entirely on third-party manufacturers, contract research organizations, clinical sites, and other vendors.
- Intellectual-property protection consisted of one issued patent expiring in November 2029 and three pending applications that could, if granted, extend protection through at least 2033; approval and enforceability were uncertain.
- Competition included established and emerging pharmaceutical companies developing treatments for cystic fibrosis, systemic sclerosis, and other inflammatory or fibrotic diseases.
- The company had no sales and marketing organization and did not expect to pay dividends in the foreseeable future.
- Although management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2015, the company was small, had limited segregation of duties, and had recently hired a controller to strengthen controls.
Most important facts for investors to verify
- Whether additional financing was obtained before cash resources became insufficient and the terms and dilution associated with that financing.
- Enrollment, safety, efficacy, and topline results from the Phase 2 cystic fibrosis, systemic sclerosis, dermatomyositis, and subsequent SLE studies.
- The amount and timing of remaining Cystic Fibrosis Foundation milestone payments and the potential royalty obligations under the award agreement.
- Whether Resunab’s Schedule I classification, DEA quotas, licenses, or import and export requirements caused clinical or manufacturing delays.
- The status, scope, and enforceability of the company’s issued and pending patent rights.
- Changes in cash burn, debt, deferred revenue, stock-based compensation, outstanding options and warrants, and future share dilution.
- Whether the company progressed from clinical development to FDA approval and commercial revenue generation; the 2015 filing provides no assurance that it would achieve either.