Corvus Pharmaceuticals, Inc. — Q3 2016 Form 10-Q
Reporting period: Three and nine months ended September 30, 2016. Unaudited results. Corvus is a clinical-stage immuno-oncology company with no product revenue; CPI-444 is its lead clinical candidate.
Financial results and liquidity
| Metric | Q3 2016 | Q3 2015 | Nine months 2016 | Nine months 2015 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $7.7m | $2.5m | $20.2m | $6.4m |
| General and administrative expense | $2.8m | $0.6m | $5.5m | $1.2m |
| Total operating expenses | $10.5m | $3.1m | $25.7m | $7.7m |
| Net loss | $10.3m | $3.2m | $25.3m | $25.3m |
| Basic and diluted loss per share | $0.51 | $7.97 | $1.83 | $72.98 |
| Net cash used in operating activities | Not separately presented | Not separately presented | $18.5m | $7.4m |
At September 30, cash and cash equivalents were $5.6m and marketable securities were $139.5m, for total cash resources of $145.1m. Total assets were $149.8m, total liabilities $6.9m, and stockholders’ equity $142.9m. The filing reports no borrowings or other debt. Profit margins are not meaningful because the company had no revenue.
Nine-month investing cash outflow was $51.4m, primarily reflecting purchases of marketable securities and $1.6m of property and equipment, partly offset by securities maturities. Financing cash inflow was $71.4m, consisting of IPO proceeds. The company reported $4.7m of future minimum facility lease payments through 2021. Contingent license milestones and royalties are not recorded as balance-sheet liabilities.
Changes versus comparable periods
- Q3 operating expenses rose $7.4m year over year, largely reflecting increased clinical development, manufacturing, staffing and public-company costs. Nine-month operating expenses increased $18.1m.
- Nine-month net loss was essentially unchanged year over year, despite higher operating costs, because the 2015 period included a $17.6m non-cash charge from remeasuring a convertible preferred stock liability. The liability was settled in 2015; no such charge occurred in 2016.
- Operating cash use increased to $18.5m from $7.4m. The company raised capital in its March 2016 IPO and April over-allotment, reporting approximately $70.6m aggregate net proceeds in the narrative; all preferred shares converted to common stock at the IPO. Common shares outstanding were 20.9m at September 30.
Outlook, management commentary and risks
- Management expects continuing losses and substantially higher R&D spending as it advances CPI-444, develops other candidates and expands operations. It believes existing cash and cash equivalents can fund planned expenditures and obligations for at least 12 months, but says current resources are not expected to fund CPI-444 through completion of development and commercialization. Additional financing or partnering may be needed and could dilute shareholders or require surrendering product rights.
- CPI-444 is being studied in a Phase 1/1b trial as a single agent and with Genentech’s TECENTRIQ. Corvus reported completing dose-selection enrollment (48 patients) and enrolling expansion cohorts at 35 sites. The filing describes limited safety and efficacy information to date, including one possibly drug-related serious adverse event in a patient receiving the combination.
- The company had selected lead development candidates for anti-CD73 and ITK programs; these remained earlier-stage programs. Clinical success, regulatory approval, enrollment, manufacturing capacity, third-party execution, competition and intellectual-property protection are material uncertainties.
- License economics include potential Vernalis milestone payments exceeding $200m across indications, plus royalties; Scripps milestone payments may total $2.6m, plus royalties. Amounts are contingent. Corvus also disclosed an ongoing patentability challenge concerning a third-party patent that could affect CPI-444 commercialization in the U.S. or Australia; it reported no material litigation proceedings.
- Management stated disclosure controls were effective as of September 30, 2016, and reported no material change in internal control over financial reporting during the quarter. Interest-rate exposure was considered limited due to the short duration and low-risk profile of investments.
Key investor verification points
- Assess cash burn and the assumptions behind management’s at-least-12-month funding estimate, particularly against the stated need for capital beyond current plans.
- Track CPI-444 trial enrollment, efficacy and safety updates, including the serious adverse event and combination-treatment risks.
- Review future R&D and clinical-trial spending, manufacturing readiness, and any need for dilutive financing or partnerships.
- Monitor Vernalis and Scripps license obligations, the patent challenge and other intellectual-property risks affecting development or commercialization.