Curis, Inc. — Q3 2015 Form 10-Q
Reporting period: Three and nine months ended September 30, 2015. The filing is unaudited. Curis is a biotechnology company focused on cancer drug development; Erivedge, commercialized by Roche and Genentech, is its principal source of revenue.
Financial performance and position
| Metric | Q3 2015 | Nine months 2015 | Comparable 2014 period |
|---|---|---|---|
| Total revenue | $2.045 million | $5.786 million | $1.765 million; $7.851 million |
| Net loss | $5.543 million | $45.520 million | $5.580 million; $13.040 million |
| Net loss per share | $0.04 | $0.37 | $0.06; $0.15 |
| Operating cash used | Not separately reported for the quarter | $19.028 million | $12.121 million for nine months |
- Q3 revenue included $2.293 million in Erivedge royalties; royalty revenue rose 29% year over year. Nine-month royalties were $5.998 million, up 23%. Net research and development revenue was negative in both periods because of reimbursements owed to Genentech.
- Nine-month revenue declined 26%, chiefly because 2014 included a $3.0 million Genentech milestone/license payment that did not recur.
- Nine-month operating expenses were $49.021 million, including $24.348 million of in-process R&D expense associated with the Aurigene collaboration. R&D expense excluding that item was $14.658 million; general and administrative expense was $9.711 million.
- At September 30, cash and cash equivalents were $28.659 million and investments were $64.811 million, for $93.470 million combined, excluding $0.153 million of restricted investments. Current assets were $96.607 million and current liabilities $9.303 million.
- Debt carrying value was approximately $25.529 million, net of issuance costs; the filing reports $25.903 million of principal and accrued interest gross. The loan bears 12.25% interest and is intended to be repaid from Erivedge royalties. Curis estimated repayment in 2019, subject to substantial uncertainty.
- In March, Curis raised $64.619 million net through a public offering of 25.091 million shares. Shares outstanding rose from 86.031 million at year-end 2014 to 128.395 million at September 30, 2015. The $30 million at-the-market program had no sales through September 30.
Changes, outlook, and risks
- The sharp increase in year-to-date loss versus 2014 primarily reflects the $24.348 million noncash Aurigene-related in-process R&D charge, higher development spending, and the absence of the prior-year $3.0 million milestone revenue. Q3 net loss was broadly unchanged year over year.
- Curis issued Aurigene 17.120 million shares valued at $23.968 million as part of the collaboration consideration. In October 2015, it exercised options for two programs and paid $6.0 million; Curis expected to expense that amount in Q4. It also agreed to up to $2.0 million of supplemental program support.
- Management said existing cash, cash equivalents, and investments should fund current and planned operations into 2017. Curis expects continued losses and may need additional financing or collaborations; inability to obtain funding could force it to delay or reduce development programs.
- Curis planned a Phase 2 CUDC-907 trial in relapsed/refractory DLBCL by year-end 2015, and expected IND filings for CA-170 and an IRAK4 inhibitor in the first half of 2016. These are plans, not assurances. Curis reported preliminary CUDC-907 responses in early-stage trials and four dose-limiting toxicities across schedules tested.
- Curis is prioritizing CUDC-907 and Aurigene programs and seeking partners for CUDC-427 and CUDC-305; it did not plan to initiate new trials for the latter two independently. Debiopharm’s rights to CUDC-305 reverted to Curis, which paid $0.750 million for drug product and agreed to royalties and sublicense-related payments.
- Competition may reduce Erivedge royalties: FDA and European regulators approved Novartis’ sonidegib for locally advanced BCC in Q3. Curis and Genentech were evaluating the effect on Curis Royalty’s rate, which may fall by two percentage points in specified circumstances. Erivedge royalties are generally applied to service the BioPharma-II loan, subject to 2015 quarterly caps.
- Other key risks include clinical or regulatory failure, reliance on Genentech/Roche and Aurigene, uncertain collaboration and milestone receipts, dilution or difficulty raising capital, and the possibility of reduced Erivedge sales or royalty rates. Curis reported no off-balance-sheet arrangements and stated disclosure controls were effective.
Investor verification priorities
- Confirm the timing and cost of the planned CUDC-907 Phase 2 trial and the CA-170 and IRAK4 IND filings, and review subsequent clinical data and safety findings.
- Track cash burn and financing needs against the stated runway into 2017, including the October $6.0 million Aurigene payment and any use of the remaining ATM capacity.
- Verify Erivedge sales, royalty rates after sonidegib’s entry, and the pace of repayment and accrued interest on the 12.25% BioPharma-II loan.
- Assess the full potential Aurigene obligations, including development, approval, commercial milestones, royalties, and sublicense revenue sharing.
- Separate recurring operating costs from the one-time Aurigene in-process R&D charge when comparing periods, and monitor share-count dilution from offerings, collaboration shares, and equity awards.