Corbus Pharmaceuticals Holdings, Inc. — Q2 2017 Form 10-Q Summary
Business context and reporting period
Corbus is a clinical-stage pharmaceutical company developing anabasum, an oral CB2 agonist intended to treat rare inflammatory and fibrotic diseases. The filing covers the three and six months ended June 30, 2017; financial statements are unaudited.
Anabasum was being developed for systemic sclerosis, cystic fibrosis, dermatomyositis and systemic lupus erythematosus. The company had no product sales and had never been profitable.
Financial position and key metrics
| Metric | Three months ended June 30, 2017 | Six months ended June 30, 2017 |
|---|---|---|
| Collaboration revenue | $350,186 | $1,643,883 |
| Research and development expense | $5,763,660 | $12,129,772 |
| General and administrative expense | $1,878,090 | $4,258,215 |
| Operating loss | $(7,291,564) | $(14,744,104) |
| Net loss | $(7,296,887) | $(14,762,326) |
| Basic and diluted loss per share | $(0.15) | $(0.31) |
| Net cash used in operating activities | Not separately provided | $(12,350,822) |
- Cash and cash equivalents were $43.0 million at June 30, 2017, compared with $15.0 million at December 31, 2016. Total cash, cash equivalents and restricted cash were $43.2 million.
- Working capital was approximately $37.1 million, based on current assets of $44.0 million and current liabilities of $6.9 million.
- Total liabilities were $7.0 million and stockholders’ equity was $37.6 million. Notes payable were $39,041, all current; the company reported no long-term debt.
- Cash provided by financing activities was $40.5 million, primarily from common-stock financings. Capital expenditures were $81,816.
- The company had an accumulated deficit of $48.0 million. A conventional gross margin was not meaningful because the company had no product revenue and reported only collaboration revenue.
Material changes versus the prior comparable period
- Second-quarter collaboration revenue decreased to $350,186 from $396,598, while six-month collaboration revenue increased to $1.6 million from $793,196, reflecting recognition of Cystic Fibrosis Foundation Therapeutics funding.
- Second-quarter R&D expense increased 62% to $5.8 million, primarily due to higher clinical-trial costs, compensation and stock-based compensation.
- Second-quarter G&A expense increased 84% to $1.9 million, driven mainly by stock-based compensation, investor-relations costs and compensation.
- Six-month net loss increased to $14.8 million from $7.1 million, and six-month operating cash use increased to $12.4 million from $5.0 million.
- Cash increased substantially following a February registered direct offering and first-quarter at-the-market sales. Common shares outstanding increased to 50.2 million at June 30, 2017 from 44.7 million at December 31, 2016.
- Non-cash stock-based compensation increased to $2.9 million for the first six months from $694,249 in the prior-year period.
Guidance, outlook, risks and unusual items
- Management expected cash on hand at June 30, 2017 to fund planned operating and capital requirements into the fourth quarter of 2018, but stated that significant additional capital would be needed to continue operations and anabasum clinical trials.
- Management expected operating losses, negative operating cash flow and expenses to increase for the foreseeable future as clinical development, manufacturing, regulatory, staffing and public-company costs expand.
- The company expected to commence a Phase 3 systemic sclerosis study and initiate a Phase 2b cystic fibrosis study by the end of 2017. A dermatomyositis Phase 2 study was expected to be completed in the fourth quarter of 2017, and an SLE Phase 2 study was planned to begin in that quarter.
- The CFFT award supported the Phase 2 cystic fibrosis program. The company had received $4.5 million of a potential $5.0 million award and expected the final $500,000 milestone to be recorded in the third quarter of 2017, subject to achievement of the milestone. Deferred revenue declined to $296,311 from $1.9 million at year-end.
- The CFFT agreement includes potential future royalty and other payment obligations upon commercialization, certain sales or licensing transactions, or a change in control.
- Failure to obtain additional financing could require the company to delay, scale back or discontinue clinical programs. Future financing could dilute shareholders, impose restrictive covenants or require relinquishment of valuable rights.
- Key development and regulatory risks include clinical-trial failure, inability to obtain FDA or other regulatory approval, intellectual-property challenges, dependence on key personnel and uncertainty regarding expense estimates.
- The company reported no legal proceedings, no material changes to previously reported risk factors and no material off-balance-sheet arrangements. It had approximately $908,187 of remaining non-cancelable operating lease commitments and $7,193 of capital lease commitments.
Important facts for investors to verify
- Whether cash runway remains consistent with management’s projection into the fourth quarter of 2018 after subsequent clinical spending and financing activity.
- Achievement and accounting treatment of the final $500,000 CFFT milestone and completion of the related cystic fibrosis program.
- Timing, design and financing of the planned systemic sclerosis Phase 3, cystic fibrosis Phase 2b, dermatomyositis and SLE studies.
- Future equity or debt financing needs, potential dilution and the remaining capacity under the $35 million at-the-market offering.
- Clinical efficacy, safety and regulatory outcomes for anabasum, including FDA and EMA feedback.
- Potential CFFT royalty and other contingent payment obligations if anabasum is commercialized, licensed, sold or involved in a change-of-control transaction.