Corbus Pharmaceuticals Holdings, Inc. — Q3 2022 Form 10-Q Summary
Business context and reporting period
Corbus is a clinical-stage biotechnology company developing immune modulators for oncology, fibrosis, autoimmunity and metabolic disease. Its pipeline includes CRB-601 and CRB-602 anti-integrin antibodies, preclinical CB1 inverse agonists, and lenabasum. The filing covers the three and nine months ended September 30, 2022.
- CRB-601 was targeted for an FDA IND submission in the first half of 2023.
- Lenabasum’s Phase 3 dermatomyositis study failed to meet its primary endpoint; the company does not plan additional company-sponsored lenabasum clinical studies and is seeking licensing partners.
- The company has no product sales and remains dependent on external financing and potential collaborations.
Financial position and key metrics
| Metric | Three months ended September 30 | Nine months ended September 30 |
|---|---|---|
| Revenue from awards | $0 in 2022; $97,323 in 2021 | $0 in 2022; $881,705 in 2021 |
| Research and development expense | $4.1 million in 2022; $8.7 million in 2021 | $9.9 million in 2022; $30.7 million in 2021 |
| General and administrative expense | $4.1 million in 2022; $5.3 million in 2021 | $14.1 million in 2022; $16.2 million in 2021 |
| Litigation settlement expense | $0 | $5.0 million in 2022; $0 in 2021 |
| Net loss | $8.8 million, or $0.07 per share, in 2022 | $31.5 million, or $0.25 per share, in 2022 |
| Operating cash flow | $30.1 million used during the nine months ended September 30, 2022 |
- Total assets were $73.8 million at September 30, 2022, compared with $107.7 million at December 31, 2021.
- Cash and cash equivalents were $12.4 million, investments were $53.8 million, and total cash, cash equivalents and restricted cash were $66.9 million.
- Working capital was approximately $49.9 million, based on current assets of $67.3 million and current liabilities of $17.5 million.
- Total debt was approximately $19.3 million net of discount, including $9.9 million classified as current. The secured K2 loan had $21.2 million of principal and final payment obligations outstanding and carried an 11.5% interest rate at September 30, 2022.
- Accumulated deficit was approximately $381.2 million. The company has never been profitable.
- Gross operating expense was $8.2 million in the third quarter and $29.0 million for the first nine months, excluding other income and expense.
Material changes versus the prior comparable periods
- Third-quarter net loss increased to $8.8 million from $2.2 million, primarily because the prior-year period included approximately $12.3 million of refundable research and development tax credits in other income.
- Nine-month net loss improved to $31.5 million from $35.4 million, despite the $5.0 million Venn litigation settlement recorded in 2022, because research and development spending declined substantially.
- Nine-month research and development expense decreased by approximately $20.8 million, reflecting completion of lenabasum clinical activities, lower clinical and data-analysis costs, reduced consulting expense, lower headcount and lower in-license upfront payments.
- Nine-month general and administrative expense declined by approximately $2.0 million, primarily due to lower compensation costs and reduced headcount.
- Cash used in operations declined to $30.1 million from $38.5 million. Investing activities provided $18.3 million in 2022, primarily from net sales and maturities of marketable securities, compared with $70.2 million used in 2021. Financing activities used $0.8 million in 2022, while 2021 included approximately $60.1 million of net equity-financing proceeds.
- Shares outstanding increased modestly to 125.3 million at September 30, 2022 from 125.2 million at December 31, 2021. No shares were sold under the company’s at-the-market facility during the first nine months of 2022.
Guidance, outlook, risks and unusual items
- Management expects operating losses to continue for the foreseeable future and expects significant research, development, manufacturing and administrative costs.
- The filing states that cash, cash equivalents and investments of approximately $66.2 million at September 30, 2022 were expected to fund operations and capital requirements for at least twelve months from the filing date; the MD&A separately states that these resources were expected to fund current planned expenditures through the second quarter of 2024. Actual liquidity will depend on spending, development progress and financing availability.
- The company expects to require significant additional capital. It may pursue equity, preferred stock, convertible debt, other debt, collaborations or government grants. Financing may be unavailable or may cause dilution, impose restrictive covenants or require the company to relinquish valuable rights.
- Because its public float was below $75 million, the company was subject to the SEC “baby shelf” limitation. Based on the filing’s calculation, it could raise no more than approximately $9.1 million through a shelf registration statement during any twelve-month period while the limitation applied.
- On May 26, 2022, the company paid $5.0 million to settle litigation with Venn Therapeutics; all claims against the company, its CEO and a former employee were dismissed with prejudice.
- On October 25, 2022, after the reporting period, the company amended its K2 loan to defer principal repayments from September 2022 to September 2023, with a possible further six-month deferral if it raised at least $30 million. The amendment also reduced the conversion price for $2.0 million of the lenders’ potential conversion amount to $0.15 and $0.2625 per share.
- On October 12, 2022, the board declared a dividend of 0.008 share of Series A preferred stock for each outstanding common share.
- The company reported no material changes to the risk factors in its prior Form 10-K, and management concluded that disclosure controls and procedures were effective.
Important facts for investors to verify
- Reconcile the filing’s liquidity statements: “at least twelve months” versus funding through the second quarter of 2024.
- Review the K2 loan amendment, repayment schedule, interest rate, collateral and highly discounted conversion-price provisions.
- Assess the timing and terms of any required capital raise, particularly given the baby shelf limitation and potential shareholder dilution.
- Monitor CRB-601’s planned IND submission and the development status of CRB-602 and the CB1 program.
- Confirm the status and potential economics of any licensing transaction for lenabasum.
- Evaluate the impact of continuing operating losses, the $381.2 million accumulated deficit and the absence of product revenue.
- Review potential milestone obligations of up to $18.4 million per compound under Jenrin, $53.0 million under Milky Way and $153.0 million under UCSF, plus future royalties.