Curis, Inc. — Q3 2013 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2013. Curis is an oncology-focused drug developer. Its approved product, Erivedge, is commercialized by Roche and Genentech; other programs include CUDC-427, CUDC-907 and licensed HSP90 inhibitor Debio 0932.
Financial results and liquidity
| Metric | Q3 2013 | Q3 2012 | Nine months 2013 | Nine months 2012 |
|---|---|---|---|---|
| Total revenue | $7.20m | $0.58m | $13.48m | $15.29m |
| Operating income (loss) | $0.13m | ($4.96m) | ($4.93m) | ($5.19m) |
| Net loss | ($1.87m) | ($3.39m) | ($8.12m) | ($4.05m) |
| Net loss per share | ($0.02) | ($0.04) | ($0.10) | ($0.05) |
Q3 revenue included a $6.0m Genentech milestone for Erivedge’s conditional European approval and $1.08m in Erivedge royalties. Nine-month revenue fell 12%, principally because Genentech milestone revenue was lower than in 2012; royalty revenue rose 163% to $2.55m. Curis reported no meaningful product-sales revenue. The Q3 operating profit did not translate into net profit: interest expense and a warrant fair-value charge produced a net loss. Nine-month R&D expense decreased 22% to $9.97m, while G&A increased 10% to $8.32m.
At September 30, cash and cash equivalents were $13.78m; investments were $49.44m current and $3.92m long-term. Cash, cash equivalents and investments totaled $67.14m, excluding restricted investments. Current assets were $64.89m and current liabilities $5.72m. Total liabilities were $36.97m and stockholders’ equity $41.57m. Debt is a $30m subsidiary loan bearing 12.25% annual interest, secured by Erivedge royalty rights and intended to be non-recourse to Curis; unpaid interest increased principal. Management estimated repayment in early 2017.
Nine-month operating cash use was $4.03m, versus $1.85m in 2012. Investing activities used $7.69m; financing activities provided $12.75m, including $9.49m net ATM proceeds. Cash increased $1.03m over the period. The company had 85.8m shares outstanding as of November 4, 2013.
Material changes, outlook and risks
- On November 5, 2013, after quarter-end, the FDA placed the CUDC-427 Phase 1 study on partial clinical hold following a patient’s death from liver failure about a month after stopping treatment. No new patients may enroll pending additional data and FDA acceptance of a protocol amendment. Curis said it would respond and submit an amendment; timing and outcome are uncertain.
- Erivedge received Australian approval in May and conditional European Commission approval in July, generating $4m and $6m milestones, respectively. Curis remains dependent on Roche/Genentech’s commercialization and development efforts. Erivedge royalties are generally applied to the subsidiary loan, subject to quarterly caps.
- Curis also received $650,000 in 2013 milestone revenue from the Leukemia & Lymphoma Society for CUDC-907. The company reduced CUDC-101 clinical development and redirected resources toward CUDC-427 and CUDC-907; it was pursuing an improved oral CUDC-101 formulation.
- Management expected existing cash, investments and working capital at September 30 to fund current and planned operations into 2016. This is not a guarantee: continued funding depends on collaboration payments, expense control and access to additional financing. The $30m Cowen ATM program had generated about $16.4m net proceeds through November 4; further equity sales may dilute shareholders.
- Curis expected continuing operating losses and did not expect profitability in the foreseeable future. Key uncertainties include clinical and regulatory outcomes, collaboration milestones, Erivedge sales and royalty collections, financing availability, and the ability to advance early-stage candidates. The Erivedge loan’s royalty collateral and default provisions create additional risk.
Most important facts for investors to verify
- FDA updates on the CUDC-427 partial hold, requested analyses, protocol amendment and any safety findings.
- Actual cash burn and runway versus management’s “into 2016” estimate, including future research and clinical costs.
- Erivedge sales, royalty growth, royalty payments applied to the 12.25% loan, and debt balance and repayment assumptions.
- Remaining ATM capacity, subsequent share issuance, and resulting dilution.
- Timing and achievement of Genentech, Debiopharm and LLS milestones, and whether collaborators advance their programs.