Corbus Pharmaceuticals Holdings, Inc. — Q1 2021 Form 10-Q Summary
Business context and reporting period
Corbus is a clinical-stage pharmaceutical company developing therapeutics targeting the endocannabinoid and immune systems for autoimmune, fibrotic, metabolic and cancer indications. The filing covers the three months ended March 31, 2021, and was filed May 13, 2021. The company had 125,033,006 common shares outstanding as of May 11, 2021.
Its lead candidate, lenabasum, was being evaluated in a Phase 3 dermatomyositis study and a Phase 2 systemic lupus erythematosus study. The DETERMINE dermatomyositis study was fully enrolled, the placebo-controlled portion had completed dosing during Q1, and topline data were expected in Q2 2021.
Financial position and key metrics
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue from awards and licenses | $647,824 | $1,762,059 | Down 63% |
| Research and development expense | $10.7 million | $23.9 million | Down $13.2 million |
| General and administrative expense | $5.3 million | $7.7 million | Down $2.4 million |
| Operating loss | $15.4 million | $29.9 million | Improved $14.5 million |
| Net loss | $16.1 million | $29.7 million | Improved $13.6 million |
| Basic and diluted net loss per share | $0.14 | $0.43 | Improved |
| Net cash used in operating activities | $21.8 million | $27.6 million | Improved $5.8 million |
Revenue consisted solely of recognition of the 2018 Cystic Fibrosis Foundation award; Corbus has not generated product sales revenue. The company reported a net loss margin of approximately 2,481% of reported revenue, compared with approximately 1,683% in Q1 2020, reflecting the limited and non-recurring nature of award-related revenue. No meaningful product gross margin was reported.
At March 31, 2021, cash and cash equivalents were $66.6 million, marketable securities were $57.4 million, and restricted cash was $1.0 million. Cash, cash equivalents and marketable securities totaled approximately $124.0 million, or approximately $125.0 million including restricted cash. Working capital was approximately $106.7 million.
Long-term debt had a net carrying value of $18.2 million. The K2 secured loan had $20.0 million of principal outstanding, plus a final payment obligation of approximately $1.2 million; the loan matures in August 2024 and bears interest at 8.5% at quarter-end. Total operating lease liabilities were $7.9 million. The company was in compliance with the K2 loan covenants at March 31, 2021.
Material changes versus the prior comparable period
- R&D expense declined primarily because cystic fibrosis and systemic sclerosis clinical trials were substantially completed, reducing clinical trial costs by approximately $7.1 million. Compensation costs declined approximately $2.2 million and drug manufacturing costs declined approximately $2.6 million.
- G&A expense declined due to lower commercialization costs, compensation, audit services and temporary help, consistent with the workforce reduction announced in October 2020.
- Interest expense increased substantially because of the K2 loan, contributing approximately $658,000 of Q1 2021 interest expense.
- The company purchased $57.4 million of marketable securities during Q1, shifting a substantial portion of cash into short-term and intermediate-term debt securities.
- Corbus sold 25,391,710 common shares under its August 2020 at-the-market agreement for gross proceeds of approximately $60.7 million and net proceeds of approximately $58.9 million. Shares outstanding increased from 98.9 million at December 31, 2020 to 125.0 million at March 31, 2021.
- Stock-based compensation was $2.6 million, compared with $3.1 million in Q1 2020. Options outstanding increased to 18.4 million at quarter-end.
Guidance, outlook, risks and unusual items
Management expected cash, cash equivalents and marketable securities of approximately $124 million at March 31, 2021, together with the expected remaining $2.5 million under the 2018 CFF Award, to fund operations and capital requirements for at least twelve months from the filing date. In the MD&A, management stated that these resources were expected to support planned expenditures into 2024. The company nevertheless expects continuing operating losses and stated that significant additional capital will be needed to fund ongoing operations and clinical trials.
The remaining $2.5 million CFF milestone payment was expected by the end of the second half of 2021, subject to achievement of the final clinical milestone. CFF award revenue is expected to be completed as the related research and development services are performed, with the program expected to conclude in the second half of 2021.
In 2020, lenabasum failed to meet primary endpoints in the RESOLVE-1 systemic sclerosis Phase 3 study and the cystic fibrosis Phase 2b study. No patients with systemic sclerosis or cystic fibrosis were then being treated with lenabasum, and management stated it had no plans for additional cystic fibrosis studies. Future development decisions for systemic sclerosis were linked to the dermatomyositis Phase 3 results.
Key risks include continued operating losses, dependence on additional financing, clinical-trial and regulatory uncertainty, potential failure to obtain product approvals, intellectual-property risks, dependence on key personnel, COVID-19 effects on operations and development timelines, dilution from future equity financing, and potential obligations under collaboration and award agreements.
Material contingent obligations include CFF approval royalties of 1.5 times the award amount upon U.S. approval and another 1.5 times upon approval in a major market, certain sales and licensing royalties, and potential milestone payments under the Jenrin and Kaken agreements. No material legal proceedings or material changes to previously disclosed risk factors were reported.
Important facts for investors to verify
- Verify the Q2 2021 topline results and subsequent regulatory or development decisions for the DETERMINE dermatomyositis study.
- Confirm receipt and timing of the remaining $2.5 million CFF milestone payment.
- Reconcile cash, marketable securities and restricted cash totals, and assess the investment maturity profile and liquidity available for operations.
- Monitor the pace and terms of additional financing, including dilution from the August 2020 at-the-market facility and outstanding options and warrants.
- Review the K2 loan’s interest rate, covenants, security interests, conversion feature, final payment and 2024 maturities.
- Assess the company’s stated runway assumptions against actual R&D spending, clinical milestones and the need for future capital.
- Track potential CFF, Kaken and Jenrin royalty, milestone and other contingent obligations if lenabasum is approved, licensed, sold or commercialized.