Cue Biopharma, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual report, not a standalone fourth-quarter report. Cue is a clinical-stage biopharmaceutical company developing its Immuno-STAT platform; it had no product sales or approved commercial products.
Financial performance and position
| Metric | 2021 | 2020 |
|---|---|---|
| Collaboration revenue | $14.94 million | $3.15 million |
| Research and development expense | $41.35 million | $33.55 million |
| General and administrative expense | $17.31 million | $14.65 million |
| Operating loss | $43.71 million | $45.04 million |
| Net loss | $44.16 million | $44.78 million |
| Basic and diluted loss per share | $1.41 | $1.56 |
| Net cash used in operating activities | $38.84 million | $32.49 million |
| Cash and cash equivalents at year-end | $64.37 million | $74.87 million |
| Marketable securities at year-end | None | $10.00 million |
- Collaboration revenue came from development and research services and milestones under the Merck and LG Chem agreements, not product sales. The filing reports 2021 revenue of approximately $12.79 million from LG Chem and $2.16 million from Merck.
- Total operating expenses rose about 22% to $58.65 million, primarily as R&D costs increased. R&D expense rose about 23%, reflecting higher laboratory and drug-substance manufacturing costs, compensation, licensing fees and other costs.
- Cash, cash equivalents and marketable securities totaled approximately $64.4 million at year-end; current assets were $68.47 million and current liabilities were $12.79 million. The company reported no marketable securities at December 31, 2021.
- Stockholders’ equity was $65.49 million, down from $78.91 million; accumulated deficit was $197.45 million. The company reported no long-term borrowings on its December 31, 2021 balance sheet.
- Operating cash use increased by approximately $6.34 million year over year. Financing provided $19.23 million in 2021, mainly from ATM share sales and option exercises.
- Gross margin is not a meaningful product-sales measure because the company had no commercial product revenue.
Material changes and business developments
- Management prioritized oncology programs in the CUE-100 series and said it was seeking partners or other funding to advance programs outside oncology, including CUE-200, CUE-300 and CUE-400.
- CUE-101 was in Phase 1 monotherapy and combination trials for HPV-positive recurrent/metastatic head and neck cancer. The company completed monotherapy dose escalation in June 2021 and selected 4 mg/kg as the recommended Phase 2 dose. It also initiated an investigator-sponsored neoadjuvant Phase 1b trial in the second half of 2021.
- CUE-102 remained preclinical. An IND filing was delayed after a CMO manufacturing delay attributed to the Defense Production Act; the company anticipated filing by the end of the first quarter of 2022.
- LG Chem paid a $3 million milestone in November 2021 for confirmation of a collaboration product candidate. The selection period for a second additional cancer antigen expired without a selection, and LG Chem’s option for a separate worldwide program expired in April 2021.
- The Merck research term and associated research funding expired on December 31, 2021; the company said it was discussing a potential path forward with Merck.
Outlook, risks and unusual items
- Management stated that year-end cash resources were expected to fund operating requirements for at least 12 months from the issuance of the financial statements, but also said additional capital would be needed to continue operations. The estimate depends on assumptions that could prove incorrect.
- On February 15, 2022, after year-end, Cue borrowed $10 million from Silicon Valley Bank and could draw up to another $10 million upon specified milestones. The loan is secured by substantially all assets other than intellectual property, which is subject to a negative pledge, and includes cash-maintenance and other restrictive covenants.
- The loan disclosures appear inconsistent on the final payment fee: the MD&A describes a 5% fee, while the subsequent-events note describes a 7.5% exit fee. The precise contractual amount should be verified.
- Clinical efficacy and safety observations are preliminary. The filing reports one confirmed partial response lasting more than 36 weeks and six cases of confirmed stable disease of at least 12 weeks among 14 evaluable monotherapy patients at the recommended dose, based on a January 2022 update. It also reports preliminary combination-trial responses; these are not evidence of approval or established benefit.
- The company reported estimated median overall survival of approximately eight months based on 47 monotherapy patients as of March 13, 2022. This is a post-year-end preliminary update, not a fiscal-2021 result, and management compared it with published historical analyses.
- Key risks include clinical-trial failure or delay, dependence on third-party manufacturers and CROs, reliance on additional financing and partnerships, competition, intellectual-property protection, and COVID-19-related supply or trial disruptions. Catalent was the sole-source manufacturer for CUE-101 clinical supply.
- The company reported an accumulated deficit and recurring operating losses, with no assurance it will achieve profitability. The financial statements received an unqualified audit opinion; management stated disclosure controls and internal control over financial reporting were effective as of December 31, 2021.
Important facts for investors to verify
- Current cash runway, subsequent spending, and whether additional financing or partnership funding is required beyond management’s stated 12-month estimate.
- The loan’s definitive final payment fee and the conditions for drawing the additional $10 million tranche, given the 5% versus 7.5% disclosure difference.
- Updated, adequately sized and controlled CUE-101 trial data, including response durability, survival, safety, and results in the combination study.
- Whether and when CUE-102’s IND was filed, and the status of its manufacturing and clinical-development plans.
- Whether Cue and Merck agreed to continue their collaboration, and whether partnerships or alternative funding are secured for non-oncology programs.
- Remaining ATM capacity, potential dilution, loan covenants, and future collaboration milestone and royalty conditions.