Corvus Pharmaceuticals, Inc. — Q1 2018 Form 10-Q
Period: Three months ended March 31, 2018. Corvus is a clinical-stage oncology biopharmaceutical company with no product revenue. Financial statements are unaudited.
Business context and development
The company’s lead candidate, CPI-444, is in Phase 1/1b trials as a single agent and with Genentech’s Tecentriq. In March 2018, Corvus amended the trial to treat up to 50 additional renal cell cancer patients with the combination. CPI-006, an anti-CD73 antibody, began a Phase 1/1b trial in March, including evaluation alone and in combinations. Corvus also reported ongoing ITK inhibitor IND-enabling work, with an IND submission targeted for late 2018 and a Phase 1 trial planned for early 2019.
Financial results and liquidity
| Metric | Q1 2018 | Q1 2017 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $12.1 million | $13.5 million |
| General and administrative expense | $2.5 million | $2.7 million |
| Total operating expenses | $14.6 million | $16.2 million |
| Interest income | $0.3 million | $0.2 million |
| Net loss | $14.3 million | $16.0 million |
| Basic and diluted loss per share | $0.63 | $0.79 |
| Net cash used in operations | $11.0 million | $12.7 million |
At March 31, 2018, cash and cash equivalents were $102.6 million and marketable securities were $41.4 million, totaling $143.9 million; total current assets were $145.2 million and total liabilities were $11.5 million. The filing presents no debt line item. No meaningful operating margin is available because the company has no revenue.
Cash increased by $57.5 million during the quarter, primarily reflecting $64.9 million net proceeds from a follow-on offering of 8.1 million shares at $8.50 per share. Investing activities provided $3.6 million net. The accumulated deficit was $137.8 million. Management believes existing cash and securities will fund planned expenditures and obligations for at least 12 months from issuance of the financial statements, but not completion of CPI-444 development through commercialization.
Changes versus prior-year quarter
- Net loss narrowed by $1.7 million; operating expenses fell by $1.6 million, while interest income increased by $0.2 million.
- R&D expense declined by $1.4 million. CPI-444 costs decreased $3.0 million, primarily because Q1 2017 included a $3.0 million Vernalis milestone payment; higher drug-manufacturing costs in 2018 partly offset lower clinical-trial and other research costs.
- CPI-006 R&D expense rose $0.5 million as its clinical trial and manufacturing activity increased. Unallocated employee and overhead costs increased $0.9 million.
- Operating cash use improved by $1.7 million. Financing cash inflow rose sharply due to the 2018 follow-on offering; Q1 2017 had only $8,000 of financing proceeds.
Outlook, risks and contingencies
- Management expects losses to continue and anticipates increased spending as clinical development and manufacturing advance. Additional capital may be needed; equity financing could dilute shareholders, debt could impose repayment and covenant obligations, and collaborations could require relinquishing product rights.
- Key risks include clinical-trial failure or delay, uncertain efficacy and safety, enrollment challenges, regulatory approval uncertainty, competition, and dependence on third parties for clinical research and manufacturing. Corvus reported serious adverse events considered possibly or probably drug-related in CPI-444 combination treatment, including hemolytic anemia, encephalitis, hepatitis, pneumonitis, mucositis and dermatitis. CPI-006 had no human safety data at the reporting date.
- Corvus relies on contract manufacturers and has no manufacturing capability of its own. License agreements include contingent milestone and royalty obligations; Vernalis potential milestones exceed $200 million across indications. Such contingent amounts are not recorded as liabilities.
- Facility lease payments remaining at March 31, 2018 totaled $3.1 million through 2021. No material legal proceedings were reported. The company reported no off-balance-sheet arrangements and no material changes to internal controls; management assessed disclosure controls as effective.
- There is no specific financial guidance. Management’s stated cash runway is at least 12 months, subject to trial progress, spending decisions and other factors.
Important facts for investors to verify
- Clinical progress, enrollment, efficacy and safety updates for CPI-444 and CPI-006, especially combination-related adverse events.
- Cash burn and whether the stated 12-month runway remains adequate as trial and manufacturing spending increases.
- Potential need for further financing, dilution and remaining capacity or use of the at-the-market offering program.
- Timing and execution of the planned ITK IND submission and other pipeline milestones.
- Contract-manufacturing continuity and contingent license milestones, royalties and other obligations.