Corvus Pharmaceuticals, Inc. — FY 2017 Form 10-K
Reporting period: Fiscal year ended December 31, 2017; filed March 1, 2018. This annual filing also reports fourth-quarter results. Corvus is a clinical-stage immuno-oncology company with no product-sales revenue; its lead candidate, CPI-444, was in Phase 1/1b testing.
Financial performance and position
| Metric | FY 2017 | FY 2016 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $46.3 million | $29.4 million |
| General and administrative expense | $10.2 million | $7.6 million |
| Total operating expenses | $56.5 million | $37.0 million |
| Net loss | $55.7 million | $36.4 million |
| Basic and diluted loss per share | $2.72 | $2.36 |
| Cash used in operating activities | $46.2 million | $27.9 million |
There is no meaningful gross margin measure because the company generated no revenue. Fourth-quarter 2017 operating expenses were $12.2 million and net loss was $11.9 million, versus $11.2 million and $11.1 million, respectively, in fourth-quarter 2016.
At year-end, cash, cash equivalents and marketable securities totaled $90.1 million, down from $134.9 million a year earlier. Working capital was $82.3 million; total assets were $94.8 million and total liabilities $9.9 million. No borrowings are reported. Operating lease obligations totaled $3.6 million, including $1.1 million due within one year. Management said existing resources should fund planned expenditures and obligations for at least 12 months from the financial-statement issuance date, but not CPI-444 development through commercialization.
Changes versus prior year
- Net loss increased by $19.3 million as operating expenses rose $19.5 million. R&D expense increased 57.7%, mainly reflecting CPI-444 clinical-trial, manufacturing and research costs, a $3.0 million Vernalis milestone, and increased CPI-006 development spending.
- Operating cash use rose $18.4 million. The larger net loss was partly offset by noncash stock compensation and increases in accounts payable and accrued liabilities.
- Cash and marketable securities fell $44.8 million. FY 2017 financing provided $1.4 million, primarily from ATM share sales and option exercises; most investing cash inflow reflected maturities of marketable securities.
- Corvus sold 52,569 shares under its Cowen ATM agreement during 2017, receiving about $0.7 million net. The agreement permits up to $125 million in gross sales, subject to market conditions and dilution.
Outlook, developments and risks
- CPI-444: More than 235 patients had been enrolled in the ongoing Phase 1/1b study by the filing date. In 2017, NSCLC and RCC single-agent and combination cohorts met criteria for expansion; both RCC arms qualified for further expansion. Interim results are preliminary and do not establish efficacy. By February 20, 2018, the company reported six partial responses, two unconfirmed, among 57 evaluable RCC patients; RCC disease-control rates were 39% for single agent and 53% for combination. NSCLC disease-control rates were 28% and 16%, respectively, with two partial responses, one unconfirmed, among 52 enrolled patients.
- Safety: The filing describes serious events in combination-treated patients, including hepatitis, pneumonitis, hemolytic anemia and encephalitis. The company warned that immune-related toxicity could increase with combinations or higher doses.
- Pipeline plans: The company filed an IND for CPI-006 in January 2018 and planned a Phase 1/1b trial in the first quarter of 2018. It planned to select an A2B antagonist candidate in 2018 and, subject to studies and regulatory steps, start an ITK inhibitor Phase 1 trial in early 2019. A newly in-licensed antibody was undergoing optimization, with IND-enabling work expected in 2018.
- Funding and execution: Corvus expects continued significant losses and rising R&D spending. It may need additional equity, debt or collaboration funding; financing may dilute shareholders, impose debt obligations or require surrendering product rights. Clinical outcomes, enrollment, regulatory review, manufacturing supply and third-party execution remain uncertain.
- Other matters: The company reported no material legal proceedings. It disclosed $461,000 of research services purchased from a vendor whose board included a Corvus director. The 2017 Tax Act reduced the federal corporate rate to 21%; the company said its GILTI tax accounting remained under evaluation. Auditors issued an unqualified opinion on the financial statements; no auditor attestation on internal controls was included under the emerging-growth-company exemption.
Important facts for investors to verify
- Updated CPI-444 response, disease-control and durability data by cohort, including the effects of prior checkpoint-inhibitor treatment and the combination arm’s safety profile.
- Whether CPI-006’s IND was accepted, whether its planned trial began, and the resulting enrollment, cost and safety milestones.
- Cash runway against actual operating burn, planned trial costs and the company’s statement that current resources do not fund CPI-444 through commercialization.
- Future ATM issuance and other financing needs, including potential dilution and remaining capacity under the Cowen agreement.
- Manufacturing continuity and dependence on third parties, license obligations and milestone payments, and any material changes in tax or regulatory assumptions.