Corbus Pharmaceuticals Holdings, Inc. — Form 10-Q Summary
Business Context and Reporting Period
Clinical-stage pharmaceutical company developing Resunab, an oral CB2 receptor agonist intended to treat rare inflammatory and fibrotic diseases. The filing covers the three and six months ended June 30, 2016; financial statements are unaudited.
Resunab was being evaluated in Phase 2 studies for cystic fibrosis, systemic sclerosis and dermatomyositis. A Phase 2 systemic lupus erythematosus study was planned for the first half of 2017. The company had no product sales and had never been profitable.
Financial Performance and Position
| Metric | Three Months Ended June 30, 2016 | Three Months Ended June 30, 2015 | Six Months Ended June 30, 2016 | Six Months Ended June 30, 2015 |
|---|---|---|---|---|
| Collaboration revenue | $396,598 | $113,636 | $793,196 | $113,636 |
| Research and development expense | $3,567,003 | $1,707,256 | $5,740,936 | $2,430,686 |
| General and administrative expense | $1,021,225 | $969,076 | $2,131,114 | $1,780,945 |
| Operating loss | $4,191,630 | $2,562,696 | $7,078,854 | $4,097,995 |
| Net loss | $4,189,391 | $2,562,541 | $7,081,632 | $4,098,259 |
| Net loss per share | $0.11 | $0.10 | $0.19 | $0.16 |
At June 30, 2016, cash and cash equivalents were $22.0 million, total current assets were $22.3 million, current liabilities were $5.0 million, and working capital was approximately $17.3 million. Total assets were $22.6 million, total liabilities were $5.0 million, and stockholders’ equity was $17.7 million.
Six-month net cash used in operating activities was $5.0 million, compared with $1.3 million in the prior-year period. Investing cash use was $187,151, primarily for property and equipment. Financing cash provided was $14.9 million, principally from a June 2016 registered direct offering.
Debt was limited: notes payable declined to $23,334 from $162,019 at December 31, 2015, with no long-term notes payable. The company had $36,375 of restricted cash supporting a landlord letter of credit.
Material Changes Versus the Prior Comparable Period
- Collaboration revenue increased 249% for the quarter and 598% for the six-month period, reflecting amortization of Cystic Fibrosis Foundation Therapeutics funding. The company still had no product revenue.
- Research and development expense increased 109% for the quarter and 136% for the six-month period, primarily because of higher clinical trial costs, compensation and stock-based compensation.
- General and administrative expense increased 5% for the quarter and 20% for the six-month period, driven mainly by compensation, legal, investor-relations and public-company costs.
- Net loss increased 64% for the quarter and 73% for the six-month period.
- In June 2016, the company sold 5.96 million common shares at $2.50 per share, generating approximately $14.9 million of gross proceeds and $14.87 million net of issuance costs. Shares outstanding increased to 43.75 million from 37.61 million at year-end 2015.
- Accrued expenses increased to $1.92 million from $562,279, primarily due to higher accrued clinical operations, product development and payroll costs.
Guidance, Outlook, Risks and Unusual Items
Management expected continuing and increasing operating losses as clinical trials, manufacturing, regulatory activities, staffing and public-company costs expand. Based on planned expenditures, management expected cash on hand at June 30, 2016, together with anticipated CFFT milestone payments, to fund operations into the fourth quarter of 2017.
The company stated that it would need significant additional capital to fund operations and Resunab trials. Potential sources included equity, convertible debt, credit facilities, collaborations and government grants. Future financing may be unavailable or dilutive, may impose restrictive covenants, or may require the company to relinquish valuable rights.
Top-line data from the systemic sclerosis study was expected in early fourth quarter 2016, and cystic fibrosis data in early first quarter 2017. Dermatomyositis enrollment was expected to conclude by the end of the second quarter of 2017. The company also expected to receive up to $1.5 million in remaining CFFT funding upon achievement of specified milestones. In August 2016, after the reporting date, it received a $1.0 million CFFT milestone payment.
The CFFT award creates contingent obligations, including royalties and other payments upon commercialization, specified sales levels, licensing, transfer or certain change-of-control events. The company disclosed no legal proceedings, no material changes to previously reported risk factors, and no material off-balance-sheet arrangements.
After quarter-end, the compensation committee approved 2015 performance-based bonuses totaling $504,150 for four executive officers.
Important Facts for Investors to Verify
- Confirm the timing, results and regulatory implications of the Resunab Phase 2 trials, particularly systemic sclerosis and cystic fibrosis.
- Assess cash burn relative to the stated funding runway and the timing and probability of remaining CFFT milestone payments.
- Evaluate the need for additional financing and the potential dilution or priority rights associated with future securities.
- Review CFFT contingent royalty and payment obligations if Resunab is commercialized, licensed, transferred or involved in a change of control.
- Monitor rising clinical trial accruals and research and development spending, as well as the accuracy of related estimates.
- Consider the impact of outstanding options and warrants, totaling 7.33 million potentially dilutive securities at June 30, 2016, although excluded from diluted loss per share because they were anti-dilutive.