Corbus Pharmaceuticals Holdings, Inc. — 2016 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2016; filed March 8, 2017. Corbus is a clinical-stage pharmaceutical company with no approved products or product sales. Its lead candidate, JBT-101, is being developed for systemic sclerosis, cystic fibrosis, dermatomyositis and systemic lupus erythematosus.
Business Context and Development Status
- JBT-101 is an oral synthetic endocannabinoid-mimetic designed to resolve inflammation and halt fibrosis without immunosuppression.
- The company completed Phase 2 studies in systemic sclerosis and cystic fibrosis during 2016 and was conducting a Phase 2 dermatomyositis study.
- In systemic sclerosis, the Phase 2 study reported a median CRISS score of 33% for JBT-101 versus 1% for placebo at week 16, with a reported p-value of 0.044. One of 27 JBT-101 subjects withdrew for moderate dizziness; no serious, severe or unexpected related adverse events were reported.
- JBT-101 has Orphan Drug and Fast Track designations for cystic fibrosis and systemic sclerosis. No marketing approval has been obtained, and the company has not submitted an NDA.
Financial Performance and Key Metrics
| Metric | 2016 | 2015 | Change |
|---|---|---|---|
| Collaboration revenue | $1.911 million | $0.648 million | +$1.263 million |
| Research and development expense | $15.437 million | $5.889 million | +$9.548 million |
| General and administrative expense | $6.460 million | $3.613 million | +$2.847 million |
| Operating loss | $19.985 million | $8.854 million | Loss increased |
| Net loss | $19.999 million | $8.851 million | Loss increased |
| Net loss per share | $0.49 | $0.28 | Loss per share increased |
| Net cash used in operating activities | $13.571 million | $4.625 million | Use increased |
| Cash and cash equivalents at year-end | $14.992 million | $12.338 million | +$2.654 million |
- Collaboration revenue consisted of amortization of a Cystic Fibrosis Foundation Therapeutics award supporting the Phase 2 cystic fibrosis trial; Corbus has not generated product revenue.
- Research and development expense increased primarily because of higher clinical trial costs, compensation and stock-based compensation.
- Stock-based compensation expense was $3.164 million, compared with $1.153 million in 2015.
- Working capital was approximately $8.504 million at December 31, 2016, based on current assets of $17.403 million and current liabilities of $8.899 million.
- Total assets were $17.888 million and total liabilities were $8.969 million. Accumulated deficit was $33.276 million.
- Debt was limited: current notes payable were $0.272 million, with no long-term notes payable reported. The company also had a capital lease obligation of approximately $8,000 and no material off-balance-sheet arrangements.
Material Changes Versus 2015
- R&D spending increased approximately 162%, reflecting progression and expansion of clinical programs.
- General and administrative expense increased approximately 79%, driven by higher stock-based compensation, employee costs, investor relations and legal expenses.
- Net loss more than doubled, from $8.851 million to $19.999 million, despite higher collaboration revenue.
- Operating cash use increased from $4.625 million to $13.571 million.
- Common shares outstanding increased from 37.6 million at year-end 2015 to 44.7 million at year-end 2016, primarily reflecting equity financings and option and warrant exercises.
- In June 2016, Corbus sold 5.96 million shares for net proceeds of approximately $14.875 million. It also sold shares under a $35 million at-the-market facility.
Liquidity, Outlook and Unusual Items
- Management stated that year-end cash of $14.992 million, approximately $27.115 million of net proceeds from a February 2017 registered direct offering, and an expected $0.5 million CFFT milestone payment should fund planned operations into the fourth quarter of 2018.
- The February 2017 offering issued 3,887,815 shares at $7.00 per share for gross proceeds of $27.215 million, less estimated issuance costs of approximately $0.1 million.
- The company expects to begin a Phase 3 systemic sclerosis program by the end of the third quarter of 2017, report cystic fibrosis top-line data by the end of March 2017, complete the dermatomyositis Phase 2 study in the third quarter of 2017 and begin an SLE Phase 2 study in the second quarter of 2017.
- The CFFT award provided up to $5 million. The company had received or billed $4.5 million through December 31, 2016 and expected the remaining $0.5 million milestone in the second quarter of 2017. Future commercialization-related royalty obligations may be significant.
- Operating lease commitments totaled approximately $1.030 million through January 2021. A related-party consulting agreement with Orchestra Medical Ventures required a remaining $50,000 payment in the first quarter of 2017.
- JBT-101 was classified as a Schedule I controlled substance in the United States, creating DEA licensing, quota, security, recordkeeping and import/export requirements.
Principal Risks and Contingencies
- The company depends entirely on the successful development, regulatory approval and commercialization of JBT-101 and has no other product candidate in development.
- Clinical results may not be replicated in larger or later-stage studies. Regulatory authorities may require additional trials, impose clinical holds or decline approval.
- Corbus has no product revenue, has incurred losses since inception and expects losses and expenses to increase for the foreseeable future. Additional financing will be required, creating potential dilution or restrictive financing terms.
- The company relies on contract manufacturers, CROs, clinical sites and other third parties. Manufacturing failures, supply interruptions or inadequate clinical execution could delay development.
- The company had filed patent applications but reported no issued patents covering JBT-101 for the principal target indications, creating intellectual-property and exclusivity risk.
- JBT-101’s Schedule I classification could delay trials or commercialization if DEA or state registrations, quotas or other requirements are not maintained.
- Future commercial success will depend on market acceptance, pricing, third-party reimbursement, competition and the company’s ability to establish sales and marketing capabilities.
Investor Verification Checklist
- Verify the audited financial statements, including the $19.999 million net loss, $13.571 million operating cash use and $14.992 million year-end cash balance.
- Confirm the terms, share issuance and net proceeds of the February 2017 registered direct offering and assess resulting dilution.
- Review the full clinical data underlying the systemic sclerosis CRISS result and subsequent Phase 3 design agreed or discussed with the FDA.
- Track cystic fibrosis, dermatomyositis and SLE trial results, enrollment, safety findings and regulatory milestones.
- Assess the timing and availability of the remaining CFFT milestone and the award’s contingent royalty and change-of-control obligations.
- Review patent prosecution status, manufacturing readiness and DEA compliance for JBT-101.
- Evaluate projected cash runway against actual clinical spending and the likelihood of additional capital raises.