Curis, Inc. — Q2 2013 Form 10-Q
Reporting period: Three and six months ended June 30, 2013. Curis is an oncology-focused drug developer. Erivedge is commercialized by Roche/Genentech; Curis is developing CUDC-427 and CUDC-907, while Debiopharm develops licensed candidate Debio 0932.
Financial performance and liquidity
| Metric | Q2 2013 | Q2 2012 | Six months 2013 | Six months 2012 |
|---|---|---|---|---|
| Revenue | $5.40 million | $4.35 million | $6.28 million | $14.71 million |
| Operating loss | $0.71 million | $2.43 million | $5.06 million | $0.23 million |
| Net loss | $1.29 million | $2.89 million | $6.26 million | $0.66 million |
| Net loss per share | $0.02 | $0.04 | $0.08 | $0.01 |
- Q2 revenue included $4.0 million in Erivedge milestone revenue, $0.81 million in royalties and $0.60 million in research and development revenue. Six-month royalties were $1.47 million, up from $0.52 million; license revenue was $4.0 million versus $14.0 million.
- Q2 research and development expense fell 30% to $3.17 million; general and administrative expense rose 28% to $2.90 million. For the first half, R&D fell 41% to $5.80 million and G&A rose 8% to $5.47 million.
- Cash and cash equivalents were $9.74 million; investments were $47.39 million. Together, unrestricted cash and investments totaled $57.13 million, excluding $0.18 million of restricted investments. Current assets were $58.42 million and current liabilities $5.37 million.
- Six-month operating cash use was $4.30 million, compared with $2.33 million of operating cash provided in the prior-year period. Cash declined $3.00 million to $9.74 million.
- At June 30, debt was $30.40 million net of issuance costs, plus $0.31 million accrued interest. The royalty-backed loan bears 12.25% interest; $0.58 million of unpaid interest was added to principal. Management estimated repayment by early 2017, dependent on Erivedge royalties.
Changes, outlook and material items
- Q2 revenue increased 24% year over year and net loss narrowed, primarily reflecting higher Erivedge royalties and the $0.55 million LLS milestone. First-half revenue declined 57% and net loss widened, largely because the prior-year period included $14.0 million of Genentech license milestones, including FDA-related payments.
- Curis reported an accumulated deficit of $754.76 million and said it expected continued operating losses. Management stated that existing resources at June 30 should fund current and planned operations into the second half of 2015; further funding depends on collaboration payments, expense control and additional financing.
- Erivedge royalties are pledged to service the BioPharma-II debt and may provide limited cash to Curis before repayment. Payments to the lender may exceed royalty receipts in periods, causing unpaid interest to increase principal.
- In July 2013, the European Commission granted conditional Erivedge approval, triggering a $6.0 million milestone payable to Curis and a $0.3 million payment to university licensors; Curis expected to recognize the milestone in Q3. Australia’s approval in May generated a $4.0 million milestone recognized in Q2.
- After quarter-end, Curis established an at-the-market program allowing up to $30 million of common stock sales, with Cowen compensation of 3% of gross sales. Sales are optional and could dilute shareholders.
- Management identified CUDC-427 and CUDC-907 as key development priorities. CUDC-101 clinical development was discontinued after low bioavailability of its oral formulation; work on alternative formulations continued. Key risks include clinical and regulatory uncertainty, dependence on collaborators and Erivedge commercialization, financing needs, and the possibility of reduced or delayed research programs if funding is inadequate.
- Disclosure controls and procedures were assessed as effective at the reasonable assurance level. The filing also corrected the classification of $375,661 of 2012 cash flows from operating to financing activities; management said the prior presentation error was not material and did not restate the earlier filing.
Important facts for investors to verify
- Whether Erivedge sales and royalties are sufficient to service the 12.25% loan and whether the estimated early-2017 repayment timing remains reasonable.
- Cash runway assumptions, subsequent financing needs, and any shares actually sold under the $30 million ATM program.
- Progress, safety findings and financing requirements for CUDC-427 and CUDC-907, and the timing and outcome of the next clinical milestones.
- Commercial uptake and regulatory status of Erivedge, including the conditions and required follow-up data associated with European approval.
- The filing gives inconsistent December 31, 2012 warrant-liability amounts: $1.488 million in the balance sheet and roll-forward versus $1.448 million in a fair-value table. Verify the correct comparative figure.