Corbus Pharmaceuticals Holdings, Inc. — FY2020 Form 10-K Summary
Business context and reporting period
Corbus is a Phase 3 clinical-stage pharmaceutical company developing therapeutics targeting the endocannabinoid system for autoimmune, fibrotic, metabolic and cancer indications. This Form 10-K covers the fiscal year ended December 31, 2020, and was filed March 15, 2021. The company has no approved products and has not generated product-sales revenue.
- Lead candidate: Lenabasum, an oral CB2 agonist being evaluated in dermatomyositis and systemic lupus erythematosus.
- Pipeline: Peripherally restricted CB1 inverse agonists for metabolic and fibrotic diseases, and novel CB2 agonists for cancer; both programs remained preclinical.
- Workforce: 76 full-time employees at December 31, 2020.
Financial performance and liquidity
| Metric | 2020 | 2019 | Change |
|---|---|---|---|
| Revenue from awards and licenses | $3.9 million | $36.1 million | Down $32.2 million |
| Research and development expense | $98.3 million | $89.6 million | Up $8.7 million |
| General and administrative expense | $28.5 million | $23.6 million | Up $4.8 million |
| Operating loss | $122.8 million | $77.1 million | Worsened $45.7 million |
| Other income, net | $11.5 million | $5.7 million | Up $5.9 million |
| Net loss | $111.3 million | $71.5 million | Worsened $39.8 million |
| Net loss per share | $1.42 | $1.12 | Worsened $0.30 |
| Net cash used in operating activities | $99.7 million | $45.7 million | Increased $54.0 million |
- Revenue consisted of $3.9 million recognized from the Cystic Fibrosis Foundation award. No license revenue was recognized in 2020; 2019 included the $27.0 million Kaken upfront payment.
- Other income included approximately $13.7 million of refundable foreign research and development tax credits, partially offset by higher interest expense, lower interest income and a $251,000 derivative-liability valuation loss.
- Cash and cash equivalents were $85.4 million at year-end, compared with $31.7 million at December 31, 2019. Including restricted cash, total cash, cash equivalents and restricted cash was $86.5 million.
- Current assets were $92.1 million and current liabilities were $31.9 million, producing working capital of approximately $60.2 million.
- Accumulated deficit was approximately $304.1 million. The company reported operating losses in every year since inception and expects further losses.
Debt, financing and capital resources
- In July 2020, Corbus borrowed the first $20.0 million tranche under a secured K2 HealthVentures facility of up to $50.0 million. The loan matures August 1, 2024, bears interest at 8.5% at year-end, and has interest-only payments for the first 24 months followed by principal and interest payments.
- Debt principal outstanding, including the contractual final payment, was $21.2 million; the year-end net carrying value was $18.0 million. The facility is secured by substantially all company assets other than intellectual property and includes financial and operating covenants.
- 2020 financing activities provided $154.9 million, including $142.2 million of gross common-stock proceeds before issuance costs and $18.8 million of net long-term borrowing proceeds.
- The company sold shares under a February 2020 public offering and two at-the-market programs. Shares outstanding increased to 98.9 million at December 31, 2020 from 64.7 million a year earlier.
- After year-end, Corbus sold an additional 25.4 million shares for net proceeds of approximately $58.9 million. Management also expected to receive the remaining $2.5 million under the 2018 CFF award.
- Management projected that year-end cash, subsequent equity proceeds and the expected CFF payment would fund planned operations and capital requirements into 2024. This outlook depends on planned expenditures and does not eliminate the need for potential future financing.
Material changes versus the prior comparable period
- Net loss increased 56% to $111.3 million, primarily because 2019 benefited from the $27.0 million Kaken upfront license payment while 2020 did not.
- Research and development expense increased 10%, driven mainly by higher clinical-trial and compensation costs. General and administrative expense increased 20%.
- Operating cash burn more than doubled, from $45.7 million to $99.7 million.
- Liquidity improved substantially because of equity issuances, the K2 loan and tax-credit receipts, but this was accompanied by significant shareholder dilution and additional secured debt.
- The company remediated previously reported material weaknesses in its control environment and information-technology general controls. Management concluded that internal control over financial reporting was effective as of December 31, 2020; the auditor was not required to provide an effectiveness attestation.
Clinical, outlook and unusual items
- Lenabasum failed to meet primary endpoints in the RESOLVE-1 Phase 3 systemic-sclerosis study and the Phase 2b cystic-fibrosis study. No systemic-sclerosis or cystic-fibrosis patients remained on treatment, and management stated that it had no plans for additional cystic-fibrosis studies.
- The DETERMINE Phase 3 dermatomyositis study was fully enrolled with 176 patients. In January 2021, Corbus sought to shorten treatment from 52 weeks to 28 weeks; topline results were expected in the second quarter of 2021.
- The Phase 2 systemic-lupus-erythematosus study was expected to complete enrollment in the second quarter of 2021, with topline results expected in the second half of 2021.
- Management expected 2021 expenses to decline as the systemic-sclerosis and cystic-fibrosis studies were completed and the dermatomyositis study concluded, with workforce reductions also contributing to lower expenses. Significant operating losses were still expected.
- Corbus intended to begin IND-enabling studies for selected CB1 and CB2 programs in 2021 and Phase 1 testing in 2022, subject to preclinical results, candidate selection, financing and regulatory progress.
- COVID-19 created risks of clinical-trial delays, enrollment and retention problems, manufacturing or shipping interruptions, site access restrictions and reduced access to capital. The company had implemented remote-work and remote-monitoring procedures and had not reported material manufacturing or shipping disruptions through the filing date.
- Lenabasum was classified as a Schedule I controlled substance in the United States, requiring DEA licenses, quotas, security and recordkeeping. Any future FDA approval would still require DEA rescheduling before U.S. commercial sales.
- Future obligations include approximately $10.2 million of undiscounted operating-lease payments, $21.2 million of K2 principal and final payments, potential Kaken milestones of up to approximately $173 million, and development milestones and royalties under the Jenrin and CFF arrangements.
Most important facts for investors to verify
- Results and regulatory implications of the DETERMINE dermatomyositis Phase 3 study and the systemic lupus erythematosus Phase 2 study.
- Whether any regulatory or commercial path remains for lenabasum after the systemic-sclerosis and cystic-fibrosis failures.
- Actual cash burn, financing needs and the sustainability of management’s projection that funding extends into 2024.
- Terms, covenant compliance and milestone-based availability of the remaining $30 million under the K2 facility.
- Further equity issuance, dilution and the company’s limited remaining authorized-share capacity at the time of future financings.
- Clinical-trial expense accruals, which were a critical audit matter and totaled $16.3 million at year-end.
- Potential CFF approval royalties, Kaken obligations, Jenrin milestones and other contingent payments if products or licenses become commercially successful.