Corbus Pharmaceuticals Holdings, Inc. — Q2 2021 Form 10-Q Summary
Business context and reporting period
Corbus is an immunology-focused biotechnology company developing therapies for inflammation, fibrosis, metabolism and oncology. Its pipeline includes lenabasum, CB1 inverse agonists, CB2 agonists and anti-integrin monoclonal antibodies. The filing covers the three and six months ended June 30, 2021, with unaudited interim financial statements.
Key financial metrics
| Metric | Three months ended June 30, 2021 | Three months ended June 30, 2020 | Six months ended June 30, 2021 | Six months ended June 30, 2020 |
|---|---|---|---|---|
| Revenue from awards and licenses | $0.1 million | $0.3 million | $0.8 million | $2.0 million |
| Research and development expense | $11.3 million | $30.7 million | $22.0 million | $54.6 million |
| General and administrative expense | $5.6 million | $7.7 million | $10.9 million | $15.4 million |
| Operating loss | $16.7 million | $38.1 million | $32.1 million | $68.0 million |
| Net loss | $17.1 million | $38.1 million | $33.2 million | $67.8 million |
| Net loss per share | $0.15 | $0.52 | $0.28 | $0.95 |
- The company has generated no product-sales revenue. Reported revenue relates principally to the Cystic Fibrosis Foundation award.
- Net cash used in operating activities was $39.3 million in the first six months of 2021, compared with $54.2 million in the prior-year period.
- Net cash used in investing activities was $70.5 million, primarily for purchases of marketable securities.
- Net cash provided by financing activities was $60.2 million, principally from common-stock issuances.
- At June 30, 2021, cash and cash equivalents were $36.1 million, marketable securities were $70.4 million and restricted cash was $0.7 million. Total cash, cash equivalents and restricted cash reported in the cash-flow statement was $36.8 million.
- Total current assets were $111.6 million and current liabilities were $18.7 million, producing working capital of approximately $92.8 million.
- Long-term debt had a net carrying amount of $18.4 million. The K2 secured loan had $20.0 million of principal outstanding, plus a contractual final payment, for total scheduled principal and final payment obligations of $21.2 million. The loan matures in August 2024.
- The company had an accumulated deficit of $337.3 million. Profitability and meaningful operating margins have not been achieved; product gross margin is not applicable because there are no product sales.
Material changes versus the prior comparable period
- Revenue declined 52% in the quarter and 62% year to date, reflecting the progression of the CFF-funded development program.
- Research and development expense declined 63% in the quarter and 60% year to date, primarily because major lenabasum clinical studies were completed or substantially completed. The reductions were partly offset by $2.25 million of upfront payments for newly licensed integrin programs.
- General and administrative expense declined 28% in the quarter and 29% year to date, mainly due to lower compensation, commercialization and consulting costs.
- Net loss declined 55% in the quarter and 51% year to date, despite approximately $0.7 million of second-quarter interest expense and $1.3 million of year-to-date interest expense related to the K2 loan.
- Common shares outstanding increased from 98.9 million at December 31, 2020 to 125.1 million at June 30, 2021. The increase primarily reflected the issuance of 25.4 million shares under the August 2020 at-the-market offering.
- The company invested $70.5 million in marketable securities during the first half of 2021; no marketable securities were held at December 31, 2020.
Guidance, outlook, risks and unusual items
- Management expects operating expenses to continue declining during 2021 as cystic fibrosis, systemic sclerosis and dermatomyositis studies conclude, but expects significant operating losses to continue for at least the next several years.
- Management expected top-line results from the Phase 2 systemic lupus erythematosus study by the end of 2021. It completed the Phase 3 dermatomyositis study in June 2021, which did not meet its primary or secondary endpoints, and planned discussions with the FDA regarding next steps.
- Management expected IND filings for CRB-601 in late 2022 and CRB-602 in late 2022 or early 2023, and an IND for its CB1 program in 2022.
- Management stated that cash, cash equivalents, marketable securities and restricted cash of approximately $107.1 million at June 30, 2021, together with the expected $2.5 million remaining CFF milestone and a $12.3 million foreign R&D tax credit refund, should fund planned operations and capital requirements into 2024. The filing also states that approximately $106.5 million of cash, cash equivalents and marketable securities was expected to cover at least twelve months from filing; the differing totals reflect inclusion of restricted cash and subsequent proceeds.
- The company remains dependent on additional financing and may need to delay, scale back or eliminate clinical and preclinical programs if funding is unavailable or unfavorable. Future equity or convertible-debt financing could dilute existing stockholders.
- In May 2021, Corbus entered licenses for CRB-602 and CRB-601, paying $0.5 million and $1.5 million upfront, respectively, and assuming potential milestone obligations of up to $53 million and $153 million, plus royalties. The Milky Way license also involved 147,875 shares issued after June 30, 2021.
- On August 3, 2021, the company received a $12.3 million foreign R&D tax credit refund. Management disclosed that certain prior-year tax disclosures require revision, but stated that the revisions have no effect on financial position, results of operations or cash flows because of the full valuation allowance.
- COVID-19 remained a risk to operations and clinical development timelines. The company reported no material legal proceedings and no material changes to previously disclosed risk factors.
Most important facts for investors to verify
- Progress, results and regulatory consequences of the systemic lupus erythematosus and dermatomyositis programs, particularly following the failed dermatomyositis Phase 3 study.
- Receipt and conditions of the remaining $2.5 million CFF milestone payment and the impact of the $12.3 million tax refund on liquidity.
- Cash-burn trends, the stated funding runway and the timing and terms of any future equity or debt financing.
- Development timelines, upfront costs, milestone obligations and royalty terms for CRB-601 and CRB-602.
- Outstanding debt obligations, K2 covenant compliance, variable interest exposure and potential dilution from options, warrants and future equity issuance.
- Revisions to the 2019 and 2020 tax disclosures and confirmation that they remain financially neutral.