Cue Biopharma, Inc. — Q2 2020 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2020. Cue is a clinical-stage biopharmaceutical company developing Immuno-STAT biologics; it has no product-sales revenue and relies on collaborations and financing to fund development. Financial amounts below are in U.S. dollars, converted from thousands where applicable.
Financial performance and position
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $1.08m | $1.06m | $1.98m | $1.43m |
| Research and development expense | $8.12m | $6.87m | $18.03m | $15.22m |
| General and administrative expense | $3.90m | $3.42m | $7.89m | $6.86m |
| Total operating expenses | $12.02m | $10.29m | $25.91m | $22.08m |
| Net loss | $10.83m | $9.52m | $23.65m | $20.79m |
| Basic and diluted loss per share | $0.38 | $0.46 | $0.86 | $1.00 |
- Cash and liquidity: At June 30, cash and cash equivalents were $59.75m and marketable securities were $25.18m; unrestricted cash, cash equivalents and marketable securities totaled approximately $84.93m. Current assets were $88.35m versus current liabilities of $14.86m.
- Cash flows: Six-month operating cash use was $17.81m; investing cash use was $10.09m, principally reflecting purchases of marketable securities; financing provided $43.36m, mainly from equity offerings. Cash, cash equivalents and restricted cash increased $15.46m to $59.90m.
- Balance sheet and obligations: Total assets were $101.35m, liabilities $21.20m and stockholders’ equity $80.15m. The filing reports no conventional borrowings. Operating lease liabilities totaled $8.43m; research and development contract liabilities totaled $7.42m.
- Margins: The filing does not present conventional gross-margin measures; collaboration revenue is small relative to operating expenses, and the company remains loss-making.
Changes versus comparable periods
- Six-month collaboration revenue rose $0.55m, while operating expenses increased $3.83m and net loss widened $2.86m. For Q2 alone, revenue was nearly unchanged year over year, while operating expenses rose $1.73m and net loss widened $1.31m.
- Higher R&D spending reflected increased laboratory, drug-substance manufacturing and clinical costs, as well as stock-based compensation. G&A increased primarily with company growth, stock compensation and legal expenses.
- Equity offerings materially strengthened liquidity but increased the share count: common shares outstanding rose from 26.56m at December 31, 2019 to 29.30m at June 30, 2020. The company reported $42.35m of net offering proceeds in the first half.
Outlook, management commentary and risks
- Management said available cash and cash equivalents at June 30 were expected to fund operations for at least 12 months from issuance of the financial statements. It also stated that future viability depends on obtaining additional capital; there is no assurance financing will be available on acceptable terms.
- CUE-101 was in a Phase 1 monotherapy study for HPV-driven recurrent/metastatic head and neck cancer. Management planned for the second half of 2020 to expand the study to evaluate CUE-101 with Merck’s KEYTRUDA as first-line therapy and to initiate an FDA submission for a neoadjuvant study. CUE-102 remained in development toward IND-enabling studies; further development of autoimmune candidates was expected in the second half of 2020 and 2021.
- Collaboration revenue came from Merck and LG Chem. The company reported no milestone or royalty revenue to date. Potential future collaboration payments are contingent on development, regulatory and commercial milestones.
- COVID-19 had not, in management’s view, significantly affected productivity or operations through the reporting period, but its eventual effects were uncertain. Risks cited include clinical-trial enrollment or activity delays, supply disruptions, regulatory delays, employee availability and reduced access to capital.
- The June 2020 ATM program authorized up to $40m of gross share sales. By June 30, the company reported approximately $8.1m of net proceeds under it; by August 3, cumulative net proceeds were approximately $11.3m. In July, stockholders approved and the company effected an increase in authorized common shares from 50m to 100m.
- The company reported no material legal proceedings, no off-balance-sheet arrangements, and effective disclosure controls as of June 30. Management expected R&D and G&A expenses to rise as activities expand.
Important facts for investors to verify
- Whether cash use and planned clinical expansion remain consistent with management’s stated minimum 12-month runway, and what additional financing may be needed.
- Progress, timing and results of the CUE-101 Phase 1 program, including the proposed combination and neoadjuvant studies, and progress toward CUE-102 and autoimmune programs.
- Remaining capacity and subsequent sales under the ATM, dilution from future equity issuance, and the effect of the increased authorized share count.
- Potential timing and conditions for collaboration milestones, and the remaining Merck and LG Chem contract liabilities and performance obligations.
- The filing’s cash-flow discussion contains figures that differ from the primary cash-flow statement for 2019: operating cash use is stated as $15.00m versus $15.15m, and the net increase in cash, cash equivalents and restricted cash as $3.61m versus $3.46m. Investors should verify the source figures.