Cue Biopharma, Inc. — Q1 2020 Form 10-Q
Reporting period: Three months ended March 31, 2020. Amounts are in U.S. dollars; financial statement figures are in millions unless stated otherwise.
Business context
Cue Biopharma is a clinical-stage biotechnology company developing Immuno-STAT biologics to selectively modulate T cells for cancer, chronic infectious diseases and autoimmune disorders. It has no product-sales revenue and relies primarily on collaboration revenue and external financing. Its lead candidate, CUE-101, was in a Phase 1 trial for HPV-driven head and neck cancer.
Financial performance and liquidity
| Metric | Q1 2020 | Q1 2019 |
|---|---|---|
| Collaboration revenue | $0.900 | $0.370 |
| Research and development expense | $9.906 | $8.353 |
| General and administrative expense | $3.989 | $3.444 |
| Total operating expenses | $13.895 | $11.797 |
| Net loss | $(12.818) | $(11.267) |
| Net loss per share, basic and diluted | $(0.48) | $(0.54) |
| Cash used in operating activities | $(10.944) | $(8.475) |
- At March 31, cash and cash equivalents were $23.432 million and marketable securities were $25.298 million. The company reported $48.730 million in unrestricted cash, cash equivalents and marketable securities.
- Total assets were $60.649 million; total liabilities were $15.413 million. Liabilities included $4.709 million of operating lease obligations and $7.820 million of research and development contract liabilities. The filing reports no debt.
- Current assets were $51.190 million versus current liabilities of $12.090 million. Cash, cash equivalents and restricted cash fell $20.858 million during the quarter; $9.950 million of net cash was used for purchases of marketable securities.
- Comprehensive loss was $12.559 million, including a $0.259 million unrealized gain on available-for-sale securities. No meaningful product gross margin is reported because there are no product sales.
Changes versus the prior comparable period
- Revenue increased $0.530 million, primarily reflecting $0.844 million recognized from LG Chem, compared with none from that collaboration in Q1 2019. Merck revenue was $0.055 million, down from $0.370 million.
- Operating expenses rose $2.098 million. R&D increased $1.553 million, mainly due to laboratory and drug-substance manufacturing costs; G&A rose $0.545 million, primarily from executive stock compensation and legal costs.
- Net loss increased $1.551 million, while loss per share improved from $0.54 to $0.48 as weighted-average shares increased to 26.57 million from 20.72 million.
- Operating cash use increased $2.469 million. Stock-based compensation expense increased to $3.175 million from $1.768 million.
Outlook, risks and notable items
- Management stated that existing resources were expected to fund projected operating requirements for 12 months from issuance of the financial statements, while noting that additional capital would be needed to support future operations and development. The company has recurring losses and negative operating cash flow.
- The March 2020 at-the-market program permits up to $35 million of gross share sales. By May 7, 2020, Cue reported selling 1,824,901 shares for approximately $34.3 million net of commissions, before estimated transaction expenses. These post-quarter proceeds strengthen liquidity but dilute existing shareholders.
- Management planned to expand the CUE-101 Phase 1 trial to evaluate combination treatment with Merck’s KEYTRUDA in the second half of 2020. The filing also described continued preclinical development across its cancer and autoimmune programs; it gave no quantitative financial guidance.
- COVID-19 precautions had not, as of the filing, caused a significant negative operating impact according to management. The company warned that the pandemic could disrupt supply chains, research, clinical-trial enrollment and execution, regulatory timelines, collaborators, and access to capital.
- Collaboration agreements offer potential milestone and royalty payments, but these are contingent on future development, regulatory and commercial achievements. The LG Chem agreement includes potential milestone payments of up to $400 million; the Merck agreement includes up to $371 million in specified milestones, plus royalties. These are potential, not assured, proceeds.
- The Cambridge facility leases were scheduled to expire in April 2021; remaining minimum lease payments at March 31 were $4.869 million before discount. The company reported no material legal proceedings, no accrued contingent liabilities and no off-balance-sheet arrangements.
Important facts for investors to verify
- Current cash runway assumptions and the use of the approximately $34.3 million of post-quarter ATM proceeds, including share dilution and transaction costs.
- Clinical progress, safety and enrollment in the CUE-101 Phase 1 study, and whether the planned KEYTRUDA combination expansion proceeded on schedule.
- Whether LG Chem and Merck collaboration activities generate future milestones or royalties, and the timing of revenue recognition against contract liabilities.
- Whether R&D spending and operating cash use continue to rise, and whether further financing will be required on acceptable terms.
- The filing’s cash-flow supplemental disclosure lists property-and-equipment purchases in accounts payable or accrued expenses as “$140,645” while labeling the statement amounts in thousands; verify the original filing/XBRL for the intended value and units.