Curis, Inc. — Q1 2017 Form 10-Q
Reporting period: Three months ended March 31, 2017; unaudited. Curis is a clinical-stage oncology biotechnology company. Its candidates included CUDC-907 (Phase 2 in DLBCL and Phase 1 in solid tumors), CA-170 (Phase 1), and pre-IND candidates CA-327 and CA-4948. Erivedge is commercialized by Roche and Genentech.
Financial results and liquidity
| Metric | Q1 2017 | Q1 2016 |
|---|---|---|
| Total revenue | $2.1 million | $1.7 million |
| Royalty revenue | $2.2 million | $1.7 million |
| Research and development expense | $13.5 million | $6.8 million |
| General and administrative expense | $3.5 million | $3.6 million |
| Operating loss | $15.1 million | $8.8 million |
| Net loss | $15.7 million | $9.4 million |
| Loss per share, basic and diluted | $0.11 | $0.07 |
| Cash used in operations | $15.1 million | $8.0 million |
At March 31, 2017, cash and cash equivalents were $42.4 million and investments were $18.4 million, totaling $60.8 million. Current assets were $64.4 million and current liabilities $11.0 million. Stockholders’ equity was $21.5 million. The filing reports no operating margin guidance; the company continued to incur substantial losses and negative operating cash flow.
Debt at quarter-end was reported at $3.5 million current and $41.3 million long-term, net of issuance costs. Curis Royalty refinanced its prior facility with a $45.0 million loan from HealthCare Royalty at 9.95%; approximately $18.4 million repaid the previous lender and $26.6 million was distributed to Curis. The loan is expected to be repaid from Erivedge royalties, which Curis said would be applied to principal and interest for the foreseeable future. Estimated total debt payments, including interest, were $62.8 million, subject to royalty assumptions.
Changes versus the prior-year quarter
- Revenue increased 23%, primarily as Erivedge royalties rose to $2.2 million from $1.7 million. Royalty revenue is subject to a reduced U.S. rate following the launch of competing sonidegib.
- R&D expense nearly doubled, increasing $6.7 million. Drivers included a $3.8 million Aurigene exclusivity installment, increased CUDC-907 and CA-170 clinical costs, and higher employee costs.
- Net loss increased 67%, to $15.7 million; operating cash use rose to $15.1 million.
- Financing activities provided $31.5 million, principally from the new royalty-backed loan and $6.2 million net ATM proceeds, offset by payoff and repayments of the prior debt.
Outlook, commentary and risks
- Management said existing cash, cash equivalents and investments should fund planned operations into 2018. To maintain adequate resources for 12 months from filing, Curis said it would reduce or delay R&D and operating spending if it could not obtain additional financing through its $30 million Cowen ATM facility or other sources. Additional financing is not assured and could dilute shareholders.
- Curis expected to file IND applications for CA-4948 and CA-327 in the second half of 2017. It expected to pay the remaining $3.75 million Aurigene exclusivity installment in Q3 2017.
- The company does not expect to become profitable in the foreseeable future. Its near-term results depend on clinical progress, financing, Erivedge sales and royalties, and collaborator performance. Most pipeline programs remain early-stage; clinical success and regulatory approval are uncertain.
- Erivedge royalties are pledged to the HealthCare Royalty loan; lower royalties could extend repayment and weaken liquidity. The filing also cites competing products, clinical and regulatory setbacks, reliance on Roche/Genentech and Aurigene, and potential financing and dilution risks.
- Unusual item: Curis recorded $0.1 million of other expense related to extinguishing the BioPharma-II loan. Management reported effective disclosure controls and no material change in internal control over financial reporting during the quarter.
Investor verification points
- Reconcile the ATM disclosures: the financial statements and liquidity discussion report 2,103,981 shares sold and $6.2 million net proceeds in Q1, while a later risk-factor passage says no such sales had occurred as of March 31.
- Check subsequent cash use, ATM availability, financing plans, and whether the stated runway into 2018 remained achievable.
- Monitor clinical-trial enrollment and results for CUDC-907 and CA-170, and progress toward the CA-327 and CA-4948 IND filings.
- Track Erivedge sales, royalty-rate effects from competition, and debt repayment terms; repayment estimates depend on future royalties.