Curis, Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. The filing was signed February 8, 2024. Amounts below are in U.S. dollars; financial statement figures are in millions unless noted. Share and per-share amounts reflect the September 2023 1-for-20 reverse stock split.
Business context
Curis is a clinical-stage biotechnology company focused on emavusertib, an oral IRAK4 inhibitor being studied in hematologic cancers. Its principal active programs are the Phase 1/2 TakeAim Leukemia study in relapsed or refractory AML and high-risk MDS, the Phase 1/2 TakeAim Lymphoma study combining emavusertib with ibrutinib, and a Phase 1 AML triplet study adding emavusertib to azacitidine and venetoclax. The two TakeAim studies are recruiting; the FDA lifted their partial clinical holds in July 2023 and August 2022, respectively. Curis has no approved internally developed drug. Its primary revenue source is royalties from Genentech/Roche’s marketed drug Erivedge.
Financial results and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue, net | $10.0 | $10.2 |
| Cost of royalties | $0.2 | $0.3 |
| Research and development expense | $39.5 | $43.3 |
| General and administrative expense | $18.6 | $19.6 |
| Loss from operations | $(48.3) | $(53.0) |
| Other income (expense), net | $0.9 | $(3.7) |
| Net loss | $(47.4) | $(56.7) |
| Net loss per share, basic and diluted | $(8.96) | $(12.14) |
| Cash used in operating activities | $(38.4) | $(54.3) |
Revenue was nearly flat, down about 1%. Research and development expense fell 9%, mainly because of lower employee-related and research/consulting costs, partly offset by higher clinical costs. General and administrative expense declined 5%, primarily from reduced employee costs. Net loss narrowed 16%, reflecting lower operating expenses and improved other income; the latter included higher interest income and a lower non-cash expense related to the royalty transaction. The filing does not present a conventional gross-margin measure.
At year-end, Curis held $56.3 million of cash, cash equivalents and investments, including $26.7 million of cash and cash equivalents and $29.7 million of short-term investments. Total current assets were $60.9 million and current liabilities $13.5 million. Stockholders’ equity was $19.7 million, down from $46.6 million in 2022; accumulated deficit was $1.2 billion. The balance sheet includes a $42.6 million liability from the sale of future Erivedge royalties. This is a royalty-financing liability, not presented as conventional borrowing debt.
Cash provided by investing activities was $37.8 million, principally reflecting net purchases and maturities of short-term investments. Financing activities provided $7.6 million, including proceeds from the July 2023 registered direct offering, partly offset by payments under the royalty agreement. Curis raised approximately $13.8 million net in that offering. Cash used in operations decreased from 2022, but remained substantial.
Outlook, risks and unusual items
- Going concern and funding: Management and the independent auditor report substantial doubt about Curis’s ability to continue as a going concern. Management said year-end liquidity was expected to fund operations into 2025, but also concluded it would not support current operations beyond 12 months from the filing date. The estimate depends on assumptions and the company expects further losses and cash outflows. Additional financing or a strategic transaction is needed; otherwise Curis may need to delay, reduce or eliminate emavusertib development.
- Oberland dispute: In March 2023, Oberland-related parties alleged defaults under the royalty purchase agreement and reserved the right to demand repurchase of the purchased royalties or pursue other remedies. Curis disputes the allegations and reported no further communication after the March letter. The estimated put/call price was $56.9 million at year-end. A successful claim or enforcement could impair Curis’s royalty stream, liquidity and ability to continue as a going concern. The filing states that no event of default had occurred as of December 31, 2023.
- Revenue concentration: Erivedge royalties represented 99% of gross revenue in 2023, versus 100% in 2022. Curis reported $9.9 million in Erivedge royalty revenue in 2023, compared with $10.3 million in 2022. Much of the royalty stream is allocated to Oberland, and the royalty rate and sales may be pressured by competing drugs, including sonidegib.
- Clinical and development risk: Emavusertib remains in early clinical development; efficacy and safety are unproven, and clinical holds followed a serious adverse event in 2022. Enrollment, trial outcomes, regulatory requirements, manufacturing and financing could delay or prevent development. Curis relies on third parties for clinical trials and manufacturing and has no in-house commercial sales infrastructure.
- Portfolio and agreements: Curis is focusing resources on emavusertib and has deprioritized other programs. It did not exercise its option for ImmuNext’s VISTA compounds; rights reverted to ImmuNext in January 2024. Curis has four licensed Aurigene programs, with potential remaining regulatory and sales milestone obligations of $42.5 million per program, plus other possible payments and royalties.
- Capital access and dilution: On February 8, 2024, Curis entered into a new at-the-market sales agreement allowing up to $100 million of common stock sales, subject to market conditions and other restrictions. Use of the facility could dilute stockholders; availability of the full amount is not assured.
- Other unusual items: Curis effected a 1-for-20 reverse stock split in September 2023. It reported effective disclosure controls and internal control over financial reporting, and the auditor issued an unqualified opinion on the financial statements while highlighting going-concern uncertainty and the royalty-liability estimate as a critical audit matter.
Important facts for investors to verify
- Updated cash burn, financing plans and the company’s ability to fund operations beyond the stated runway.
- Status and potential consequences of the Oberland allegations, including any notice, cure, put-option exercise or legal action.
- Enrollment, safety findings and final clinical data from the three emavusertib studies; distinguish preliminary data from verified results.
- Erivedge sales, royalty receipts, amounts allocated to Oberland and the assumptions used to value the royalty liability.
- Potential dilution and actual proceeds if Curis sells shares under its 2024 at-the-market agreement.
- Milestone, royalty and sublicense obligations under the Aurigene agreement, and the future status of deprioritized programs.