Curis, Inc. — 2018 Form 10-K
Reporting period: Fiscal year ended December 31, 2018. Filed March 26, 2019. Curis is a clinical-stage oncology biotechnology company; figures below are in U.S. dollars. Share and per-share amounts reflect the May 2018 1-for-5 reverse stock split.
Financial performance and liquidity
| Metric | 2018 | 2017 |
|---|---|---|
| Revenue | $10.4 million | $9.9 million |
| Net loss | $32.6 million | $53.3 million |
| Loss per share, basic and diluted | $0.98 | $1.79 |
| Research and development expense | $24.4 million | $45.1 million |
| General and administrative expense | $14.8 million | $14.1 million |
| Cash used in operating activities | $30.1 million | $48.4 million |
- All 2018 revenue was effectively attributable to Erivedge royalties from Genentech/Roche: royalty revenue was $10.4 million, versus $9.8 million in 2017. Curis reported no material product-sales revenue.
- Operating loss was $29.3 million, compared with $49.8 million in 2017. The filing does not provide a conventional product gross margin; the business is development-stage and royalty revenue is reported separately from R&D and other operating costs.
- At year-end, cash and cash equivalents were $23.6 million and short-term investments were $0.6 million; current assets totaled $28.0 million and current liabilities $13.3 million. Accumulated deficit was $984.8 million and stockholders’ equity was negative $4.5 million.
- Year-end debt, net of issuance costs, was $35.5 million, including $6.9 million current and $28.6 million long-term. The debt was held by Curis Royalty and secured by Erivedge royalty rights. Curis reported $3.9 million of interest expense for 2018.
- Cash and investments declined from $60.2 million at year-end 2017 to $24.3 million at year-end 2018. The company used $30.1 million in operating cash and reported $21.4 million of cash provided by investing activities, primarily net investment maturities and purchases.
Material changes and notable items
- Net loss narrowed by $20.7 million year over year, principally as R&D expense fell $20.7 million. The 2017 period included a $7.5 million Aurigene exclusivity payment and higher CA-170 clinical costs; 2018 also reflected lower direct R&D spending and a fourth-quarter headcount reduction.
- Revenue rose 5%, reflecting higher Erivedge royalties. U.S. royalties had already been reduced by 2 percentage points following the launch of competing Hedgehog inhibitor Odomzo; further reductions may apply in other countries where it is approved and sold.
- On March 22, 2019, after the fiscal year-end, Curis sold a portion of future Erivedge royalty rights to Oberland-affiliated purchasers for $65.0 million upfront. About $37.2 million repaid the HealthCare Royalty loan and related fees, and Curis reported approximately $27.5 million in net proceeds. The agreement also provides for potential milestone payments of $17.2 million and $53.5 million, subject to royalty thresholds and deadlines. Purchasers receive defined portions of future royalties; the transaction encumbers royalty-related assets and includes default remedies.
- Fourth-quarter 2018 revenue was $2.8 million and net loss was $5.9 million, compared with fourth-quarter 2017 revenue of $3.3 million and net loss of $8.0 million.
Pipeline, outlook and risks
- Fimepinostat (CUDC-907): Phase 2 study in relapsed/refractory DLBCL, including MYC-altered disease. Combined Phase 1 and interim Phase 2 results cited an objective response rate of 23% (14/60) in MYC-altered patients, with median response duration of 13.6 months. These are interim clinical results, not proof of approval or commercial benefit. Curis planned a Phase 1 combination study with venetoclax in double-hit lymphoma, with enrollment in the first half of 2019 and initial data expected in the second half of 2019. The FDA granted orphan-drug and Fast Track designations for DLBCL.
- CA-4948: Phase 1 dose-escalation trial in non-Hodgkin lymphomas, including patients with MYD88 alterations; initial data were expected around mid-2019.
- CA-170: Phase 1 study in advanced solid tumors and lymphomas. Preliminary 2018 data described immune activity, tumor shrinkages in several patients and tolerability up to 1,200 mg twice daily; the filing cautions that preliminary results may change. Mesothelioma enrollment began in January 2019, with initial data expected in the second half of 2019. Aurigene also began a Phase 2 trial in India.
- CA-327 remained pre-IND; Curis had licensed a fourth Aurigene immuno-oncology program in 2018. Curis stated it would concentrate near-term resources on fimepinostat, CA-4948 and CA-170. It also reported cost reductions and resource shifts toward clinical work, targeting quarterly cash burn of about $8 million versus approximately $11 million previously.
- Management estimated that year-end cash, cash equivalents and investments plus the Oberland net proceeds would fund operations into the second half of 2020 under its current plan. Curis expects continuing losses and said it will need additional capital or debt financing; financing may not be available on acceptable terms.
- Key risks include clinical-trial failure or delay, dependence on Genentech/Roche for Erivedge royalties and Aurigene for partnered programs, competition and royalty-rate reductions, limited manufacturing and commercialization infrastructure, and substantial future financing needs. Nasdaq had notified Curis that it was below certain continued-listing market-value and financial requirements, with a compliance deadline of June 25, 2019.
- Curis disclosed no material legal proceedings. Management and the auditor reported effective internal control over financial reporting; the financial statements received an unqualified audit opinion. The auditor emphasized that additional financing will be required to fund planned operations.
Important facts for investors to verify
- Current cash runway and quarterly burn after the Oberland transaction, including how much Erivedge royalty cash Curis retains under the payment waterfall.
- Clinical-trial enrollment, final and updated efficacy and safety data, and whether the stated 2019 milestones were achieved.
- Oberland agreement terms, including royalty allocation, conditional milestone payments, collateral, default triggers and potential repurchase obligations.
- Erivedge sales trends, royalty reductions by territory, and the competitive impact of Odomzo and other therapies.
- Nasdaq listing compliance status and the company’s ability to raise additional capital without material dilution.
- Aurigene’s remaining milestone and royalty obligations: the filing reports potential unpaid or unwaived regulatory and commercial milestones of $42.5 million per licensed program, plus royalties and other contingent payments.