Business context and reporting period
Curis, Inc. is a clinical-stage biotechnology company focused on cancer therapeutics. This unaudited Form 10-Q covers the quarter and six months ended June 30, 2018; comparisons are with the corresponding 2017 periods. Share and per-share amounts reflect the 1-for-5 reverse stock split effective May 29, 2018.
Its clinical-stage candidates were fimepinostat (CUDC-907), CA-170 and CA-4948; CA-327 remained pre-IND. Erivedge (vismodegib), commercialized by Genentech and Roche for advanced basal cell carcinoma, provided Curis’s reported revenue. Curis stated that its existing cash, cash equivalents and investments were expected to fund planned operations into the second half of 2019.
Financial performance and position
| Metric | Q2 2018 | Q2 2017 | Six months 2018 | Six months 2017 |
|---|---|---|---|---|
| Total revenue | $2.358 million | $2.061 million | $4.826 million | $4.192 million |
| Research and development expense | $6.451 million | $11.255 million | $14.717 million | $24.795 million |
| General and administrative expense | $3.633 million | $3.819 million | $7.614 million | $7.351 million |
| Operating loss | $7.860 million | $13.109 million | $17.768 million | $28.161 million |
| Net loss | $8.664 million | $14.090 million | $19.411 million | $29.832 million |
| Basic and diluted loss per share | $0.26 | $0.49 | $0.59 | $1.04 |
- Royalties were $2.394 million in Q2 and $4.868 million for the six months, up 14% and 13%, respectively. Research and development revenue was negative $36,000 and negative $42,000, respectively. All reported revenue for the six-month periods came from the Genentech collaboration.
- Q2 and six-month research and development expense fell 43% and 41%, respectively. Management attributed the reductions mainly to lower clinical costs for fimepinostat and CA-170; the six-month comparison also reflected a $3.8 million Aurigene exclusivity payment in 2017. Higher CA-4948 costs partly offset the decreases.
- Cash, cash equivalents and investments totaled $40.420 million at June 30, 2018, versus $60.232 million at December 31, 2017. Current assets were $43.701 million and current liabilities $14.503 million. Stockholders’ equity was $7.110 million, down from $23.993 million.
- Operating cash use was $16.902 million for the first half, versus $24.369 million in 2017. Investing activities provided $12.041 million, primarily from net investment maturities and sales; financing activities used $2.962 million. Cash and cash equivalents declined $7.823 million to $30.465 million.
- Debt carrying value was $38.497 million, comprising $6.965 million current and $31.532 million long-term. The filing reports $38.8 million of principal and interest due gross of issuance costs. The royalty-backed HealthCare Royalty Partners loan bears 9.95%; first-half payments were $5.1 million, including $3.1 million applied to principal.
- Cost of royalty revenue was $134,000 in Q2 and $263,000 for the six months. The filing does not present a consolidated operating margin measure.
Material changes versus the prior comparable period
- Net loss narrowed by 39% in Q2 and 35% for the first half, reflecting lower operating expenses, particularly research and development, along with higher royalty revenue.
- General and administrative expense was down 5% in Q2 but up 4% for the first half. Higher legal and professional costs contributed to the six-month increase.
- Interest expense rose to $2.018 million for the first half from $1.775 million in 2017, despite the lower stated interest rate on the refinanced royalty loan.
- Curis chose not to pay the $10 million 2018 fee to extend broad immuno-oncology exclusivity with Aurigene. It retained program-specific, annual exclusivity options for the IRAK4 and PD1/VISTA programs.
Outlook, risks and unusual items
- Management said the June 30 liquidity balance should support planned operations into the second half of 2019, but also said it may reduce or delay research and development and operating spending if it cannot raise additional capital. The company warned that financing may not be available on acceptable terms and that failure to obtain funds could delay, reduce or eliminate development programs.
- Curis was not profitable and expected continued losses. Erivedge royalties were expected to be applied to interest and principal on the royalty-backed debt for the foreseeable future, limiting their availability for other operations.
- Fimepinostat received FDA Fast Track designation in May 2018 for relapsed or refractory DLBCL. The Phase 2 study was ongoing, and Curis said it was discussing the appropriate regulatory path with the FDA. CA-170 and CA-4948 were in Phase 1 studies; Curis planned to work toward filing a CA-327 IND in 2018. No specific clinical readouts or financial guidance were provided in the filing.
- Key risks include clinical and regulatory failure or delay, dependence on Aurigene and on Genentech/Roche, competition, possible decreases in Erivedge sales or royalty rates, and the company’s need for additional financing. Erivedge royalties are reduced in the U.S. following the approval and sale of competing sonidegib (Odomzo).
- Curis disclosed that its $7.1 million stockholders’ equity was below Nasdaq Global Market’s $10 million minimum. It expected a deficiency letter; the filing also noted it had regained compliance with the separate minimum-bid-price requirement after the reverse split.
- Chief Medical Officer David Tuck retired effective August 3, 2018 and agreed to provide advisory services through May 3, 2019, for a monthly retainer of $35,000 plus approved expenses.
Important facts for investors to verify
- Whether cash burn, financing availability and any spending reductions change the stated runway beyond the second half of 2019.
- Clinical-trial progress, safety and efficacy data, and the FDA’s feedback on fimepinostat’s regulatory path; also the timing of CA-327’s planned IND filing.
- Erivedge sales and royalty rates, the effect of competition, and the rate at which royalty receipts reduce HealthCare Royalty Partners’ debt.
- Nasdaq compliance status given stockholders’ equity below the stated $10 million threshold.
- Potential Aurigene program costs, milestones and remaining payment obligations; the filing states up to $42.5 million in remaining regulatory and commercial milestone obligations per licensed program, plus certain additional-indication payments.