Cue Biopharma, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Amounts below are in U.S. dollars; financial statement amounts are generally in millions unless noted.
Business context
Cue Biopharma is a clinical-stage biopharmaceutical company developing its Immuno-STAT platform to selectively modulate T cells. It had no product-sales revenue and remained dependent on collaboration revenue and external financing. CUE-101 was its lead clinical candidate, in Phase 1 monotherapy testing for HPV-driven head and neck cancer; the company also reported initiating a Phase 1 combination study with KEYTRUDA in Q4 2020.
Key financial metrics
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $0.704 | $0.984 | $2.679 | $2.409 |
| General and administrative expense | $3.318 | $2.776 | $11.205 | $9.640 |
| Research and development expense | $7.517 | $5.302 | $25.542 | $20.523 |
| Total operating expenses | $10.835 | $8.078 | $36.747 | $30.163 |
| Net loss | $(10.031) | $(6.990) | $(33.682) | $(27.782) |
| Loss per share, basic and diluted | $(0.34) | $(0.31) | $(1.20) | $(1.30) |
| Cash used in operating activities | Not presented quarterly | Not presented quarterly | $(25.495) | $(24.359) |
Gross margin is not meaningful because the company had no product sales. Collaboration revenue did not cover operating expenses. At September 30, 2020, cash and cash equivalents were $71.729 million and marketable securities were $20.074 million, for $91.803 million of unrestricted cash, cash equivalents and marketable securities. Current assets were $93.563 million and current liabilities were $14.227 million. The filing reports no conventional borrowings; liabilities included operating lease liabilities of $8.202 million and research and development contract liabilities of $7.170 million.
Changes versus the prior comparable period
- Q3 collaboration revenue declined $0.280 million year over year, while nine-month revenue rose $0.270 million. Revenue came from the Merck and LG Chem collaborations; no milestones or royalties had been recognized.
- Q3 operating expenses increased $2.757 million year over year, principally from higher R&D spending. Nine-month operating expenses increased $6.584 million.
- Q3 net loss widened by $3.041 million; the nine-month net loss widened by $5.900 million.
- Nine-month operating cash use increased $1.136 million. Financing provided $58.370 million, primarily from common-stock offerings, versus $16.296 million in the prior-year period.
- Common shares outstanding increased from 26,562,178 at December 31, 2019 to 30,251,083 at September 30, 2020, mainly reflecting equity offerings and other share issuances.
Outlook, commentary and risks
- Management expected existing cash and cash equivalents at September 30, 2020 to fund operations for at least 12 months from the financial statements’ issuance date. It also stated that additional capital would be needed to fund future operations; actual runway depends on spending and financing conditions.
- Management expected both R&D and G&A expenses to increase as clinical and development activity expands. It anticipated filing an IND for CUE-102 in the second half of 2021 and expected a neoadjuvant CUE-101 study to begin in the first half of 2021.
- R&D expense growth reflected higher laboratory, drug-substance manufacturing, clinical and stock-based compensation costs. Nine-month stock-based compensation was $8.199 million.
- The COVID-19 response had not, in management’s view, significantly affected productivity or operations to date, but potential disruption to trials, vendors, supply chains, staffing and access to capital remained uncertain.
- In June and July 2020, the company extended leases for laboratory and office space through June 14, 2022. Future minimum lease payments totaled $8.661 million before a $0.459 million present-value discount.
- LG Chem’s option to select an additional Immuno-STAT was extended after quarter-end, on November 5, 2020, from November 6, 2020 to April 30, 2021. Potential milestone and royalty amounts are contingent and are not assured revenue.
- The company reported no material legal proceedings, no accrued contingent liabilities, and no material changes to previously disclosed risk factors other than expanded COVID-19 risks. Management concluded disclosure controls were effective as of September 30, 2020.
Important facts for investors to verify
- Whether clinical progress, trial enrollment and results for CUE-101 and other candidates match the stated development plans.
- Whether the stated cash runway remains adequate as R&D spending rises, and whether further equity financing or other capital is required.
- The amount and timing of collaboration revenue actually recognized, and whether any contingent LG Chem or Merck milestones become achievable.
- The impact of equity issuance and stock-based compensation on dilution, alongside the company’s operating cash burn.
- Whether COVID-19, manufacturing, regulatory or vendor disruptions materially alter trial timelines or development costs.