Curis, Inc. — Q2 2011 Form 10-Q
Reporting period: Three and six months ended June 30, 2011. Curis is a clinical-stage cancer drug discovery and development company with one reportable segment. Its business depends on internal research and development and partnerships; it had no marketed products.
Financial performance and liquidity
| Metric | Q2 2011 | Q2 2010 | Six months 2011 | Six months 2010 |
|---|---|---|---|---|
| Revenue | $392,867 | $98,634 | $526,405 | $12,656,968 |
| Research and development expense | $3,144,050 | $2,244,742 | $6,202,549 | $4,712,546 |
| General and administrative expense | $1,867,782 | $1,780,377 | $4,275,131 | $6,206,822 |
| Operating loss (income) | $(4,618,965) | $(3,926,485) | $(9,951,275) | $1,737,600 |
| Net loss (income) | $(4,914,064) | $(2,097,987) | $(11,714,215) | $2,686,278 |
| Operating cash flow | Not stated for quarter | Not stated for quarter | $(8,826,531) | $2,920,539 |
- Q2 revenue included a $300,000 license-fee payment; six-month 2010 revenue included $8.333 million from Debiopharm and $4.0 million from the Micromet settlement. The resulting year-over-year revenue decline largely reflects those nonrecurring 2010 items.
- Q2 R&D expense rose 40%, mainly from CUDC-101 clinical and manufacturing work and CUDC-907 development. Six-month R&D rose 32%. Six-month G&A fell 31%, primarily because 2010 included approximately $1.525 million in Micromet-related legal costs.
- At June 30, cash and cash equivalents were $6.792 million and marketable securities were $25.935 million, totaling $32.726 million. This excludes $278,000 of restricted long-term investment. Cash and securities together were down from $40.380 million at year-end 2010.
- Total assets were $43.068 million; current liabilities were $3.387 million. The filing reports a $3.427 million warrant liability, remeasured through earnings. It does not identify conventional borrowings or provide a clear debt balance.
- The six-month net loss included a $1.822 million noncash charge from an increase in warrant fair value. Cash from financing activities was $1.296 million, principally from stock-option and warrant exercises and employee stock purchases.
- Operating margins are not meaningful indicators for this development-stage company given very low revenue and substantial R&D spending.
Material changes versus comparable periods
- Six-month results shifted from $2.686 million net income in 2010 to an $11.714 million net loss in 2011, reflecting the absence of the prior-year Debiopharm and Micromet license revenues, higher R&D costs, and the 2011 warrant revaluation expense.
- Six-month operating cash flow moved from $2.921 million provided to $8.827 million used. Cash and cash equivalents declined by $1.035 million during the first half of 2011.
- Research spending was redirected toward CUDC-101 and newly selected CUDC-907, while spending on other network-targeted programs declined.
Outlook, commentary and risks
- Management expected available capital at June 30, 2011 to fund current and planned operations into the fourth quarter of 2012. Continuing beyond that point depends on expense control, collaboration and milestone payments, and/or additional financing. Curis expects continued operating losses and does not expect profitability in the foreseeable future.
- Roche/Genentech anticipated filing a U.S. NDA for vismodegib in advanced basal cell carcinoma in 2011; the European submission schedule depended on discussions with the EMA. Curis would be eligible for milestone payments if submissions were filed and accepted, with further milestones on approval and potential royalties on sales.
- In a pivotal phase II advanced BCC study, independent review found response rates of 43% in locally advanced disease and 30% in metastatic disease. Reported common adverse events included muscle spasms, hair loss, altered taste, weight loss and fatigue. Seven deaths occurred in the study; investigators did not consider them related to vismodegib.
- Curis had enrolled 45 patients in the CUDC-101 phase I expansion study and expected to complete enrollment and report full data in the second half of 2011. It planned to begin a head-and-neck cancer combination study, anticipated its first patient in Q3 2011, and intended to pursue an oral formulation with a potential clinical filing in late 2011. It expected to file an IND for CUDC-907 in early 2012, subject to successful preclinical and formulation work.
- On June 13, Curis established an at-the-market agreement permitting up to $20 million in common-stock sales, subject to a 3% agent commission. No shares had been sold under it by June 30; in July, 65,527 shares were sold for $255,000 net proceeds.
- Principal risks include clinical or regulatory setbacks, dependence on Genentech and Debiopharm, uncertain milestone timing, need for additional capital and possible dilution, competition, and the possibility that financing may not be available on acceptable terms. The company said disclosure controls were effective and reported no material change in internal control over financial reporting during the quarter.
Investor facts to verify
- Whether Roche/Genentech filed and obtained acceptance of the expected vismodegib regulatory submissions, and the resulting timing and likelihood of Curis milestones or royalties.
- Clinical progress, enrollment, safety findings and data for CUDC-101, CUDC-907 and Debio 0932, including whether planned milestones were achieved.
- Actual cash burn and whether the projected runway into Q4 2012 remains realistic given development costs and the timing of collaborator payments.
- Subsequent ATM share sales, proceeds, commission costs and dilution; the filing reports July proceeds of $255,000 net.
- Changes in the $3.427 million warrant liability and the assumptions behind its Level 3 valuation, which materially affected reported earnings.