Corbus Pharmaceuticals(CRBP) - 2018 Q4 - Annual Report

Part I Business Corbus Pharmaceuticals is a Phase 3 clinical-stage company developing therapeutics for inflammatory and fibrotic diseases by targeting the ECS Overview and Pipeline Corbus is a Phase 3 company developing novel therapeutics for chronic inflammatory and fibrotic diseases, with lead drug lenabasum and pipeline candidate CRB-4001 - Corbus is a Phase 3 clinical-stage company focused on developing drugs for inflammatory and fibrotic diseases by targeting the endocannabinoid system (ECS)[18] - The lead drug candidate is lenabasum, a novel, synthetic, oral cannabinoid (CB2 agonist) designed to resolve chronic inflammation and halt fibrotic processes[18] - Lenabasum is in development for four indications: Systemic Sclerosis (SSc), Dermatomyositis (DM), Cystic Fibrosis (CF), and Systemic Lupus Erythematosus (SLE)[18][20] - The pipeline includes CRB-4001, a 2nd generation CB1 inverse agonist for fibrotic liver diseases like NASH, with a Phase 1 study expected by the end of 2019[18][85] Clinical Development - Lenabasum Lenabasum is advancing through late-stage clinical trials for SSc, CF, DM, and SLE, with Phase 3 studies ongoing and positive open-label extension data Lenabasum Clinical Trial Status | Indication | Phase | Enrollment Target | Expected Completion | | :--- | :--- | :--- | :--- | | Systemic Sclerosis (SSc) | Phase 3 (RESOLVE-1) | ~354 patients | 2020 | | Cystic Fibrosis (CF) | Phase 2b | ~415 patients | 2020 | | Dermatomyositis (DM) | Phase 3 (DETERMINE) | ~150 patients | Not specified | | Systemic Lupus Erythematosus (SLE) | Phase 2 | ~100 patients | Not specified | - Open-label extension (OLE) studies in SSc and DM are ongoing, showing continued positive efficacy data, with 87% of SSc subjects achieving a clinically meaningful reduction in mRSS (≥ 5 points) at 18 months[20][31] - The FDA has granted lenabasum Orphan Drug Designation for SSc, CF, and DM, and Fast Track Status for SSc and CF, with EMA also granting Orphan Designation for all three indications[22] Lenabasum's Mechanism of Action Lenabasum functions as a pro-resolving drug by selectively binding to the CB2 receptor, stimulating Specialized Pro-Resolving Lipid Mediators (SPMs) to resolve inflammation and halt fibrosis - Lenabasum is a synthetic, oral small-molecule that selectively binds to the CB2 receptor, which is found on activated immune cells and fibroblasts[69] - It stimulates the production of Specialized Pro-Resolving Lipid Mediators (SPMs) that resolve inflammation and halt fibrosis without being immunosuppressive[69][73] - A human clinical study demonstrated that lenabasum increases pro-resolving lipid mediators and decreases inflammatory lipid mediators, providing evidence of its unique pro-resolution mechanism in humans[78][79][83] Market Opportunity and Competition Corbus targets rare inflammatory and fibrotic diseases with significant unmet medical needs, including SSc and CF, facing competition from large pharmaceutical firms Estimated Patient Populations (U.S., Europe, Japan) | Indication | Estimated Patients | | :--- | :--- | | Systemic Sclerosis (SSc) | ~200,000 | | Dermatomyositis (DM) | ~80,000 | | Systemic Lupus Erythematosus (SLE) | ~550,000 | | Cystic Fibrosis (CF) | ~70,000 | - There are no FDA-approved treatments specifically for Systemic Sclerosis (SSc), representing a significant unmet medical need[92] - In Cystic Fibrosis (CF), lenabasum aims to reduce pulmonary exacerbations, a key driver of morbidity and mortality for which there are no currently approved drugs[111][112] - Competition includes several large pharmaceutical companies (Boehringer Ingelheim, Galapagos, GSK) developing drugs for SSc and existing CF therapies from companies like Vertex and Celtaxsys[126][127] Intellectual Property Corbus has secured U.S. patents for lenabasum through 2034 and obtained Orphan Drug Designation in the U.S. and EU, along with licensed IP for CRB-4001 - U.S. patents have been issued covering compositions of lenabasum and its use in treating inflammatory and fibrotic diseases, providing exclusivity through 2034[131][132][133][134] - Lenabasum has received Orphan Drug Designation in the U.S. (7 years exclusivity) and EU (10 years exclusivity) for SSc, CF, and DM[136] - An exclusive license from Jenrin Discovery provides worldwide rights to over 600 cannabinoid compounds, including CRB-4001, with U.S. patent protection extending to July 2033[135] Regulatory Matters The company's products are subject to extensive regulation, with lenabasum classified as a Schedule I controlled substance requiring DEA oversight - Lenabasum is currently classified as a Schedule I controlled substance under the U.S. Controlled Substances Act (CSA), requiring strict DEA oversight for manufacturing, distribution, and clinical trials[167][270] - If lenabasum receives FDA approval, the DEA will need to conduct a scheduling determination to place it in a schedule other than Schedule I before it can be commercially prescribed[275] - The company has received Orphan Drug Designation for lenabasum in SSc, CF, and DM, which provides seven years of market exclusivity in the U.S. upon approval[154] - Fast Track Designation has been granted for lenabasum in SSc and CF, intended to facilitate the development and expedite the review of drugs for serious conditions with unmet medical needs[136] Risk Factors The company faces significant risks, including operating losses, dependency on lenabasum, outsourced manufacturing, regulatory hurdles, and intellectual property challenges - Financial Risk: The company has a history of operating losses ($55.7 million in 2018) and will require significant additional capital to complete clinical trials and commercialize its products[189][190][192] - Product Dependency: The business heavily depends on the successful development, regulatory approval, and commercialization of its lead candidate, lenabasum[201] - Regulatory and Manufacturing Risk: Lenabasum is a Schedule I controlled substance, requiring DEA licenses and compliance, which could cause delays. The company is completely dependent on third-party contract manufacturers for its drug supply[269][259] - Clinical and Commercial Risk: Clinical trials are lengthy, expensive, and uncertain. Even if approved, market acceptance by physicians, patients, and payors is not guaranteed[204][211][214] - Intellectual Property Risk: Commercial success depends on maintaining patent protection and avoiding infringement of others' proprietary rights, which involves complex and costly legal challenges[300][309] Properties As of December 31, 2018, the company leased office space in Norwood, MA, which was expanded in February 2019 to 62,756 square feet with commitments totaling $11.9 million - The company leases its principal office space at 500 River Ridge Drive, Norwood, MA[370] - In February 2019, the lease was amended to expand the total leased space to 62,756 square feet, with the term extending to October 31, 2026[370] Estimated Future Minimum Rent Commitments (as of Feb 2019 amendment) | Year | Amount | | :--- | :--- | | 2019 | $678,000 | | 2020 | $1,288,000 | | 2021 | $1,592,000 | | 2022 | $1,640,000 | | 2023 | $1,687,000 | | Thereafter | $5,036,000 | | Total | $11,921,000 | Legal Proceedings The company is not currently subject to any material legal proceedings but may face actions in the ordinary course of business - Corbus is not currently a party to any material legal proceedings[373] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Corbus Pharmaceuticals' common stock trades on Nasdaq under 'CRBP', with no cash dividends paid or planned, and approximately 92 record holders - The company's common stock is listed on the Nasdaq Global Market under the ticker symbol "CRBP"[377] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[378] - As of March 6, 2019, there were approximately 92 record holders of the common stock[379] Management's Discussion and Analysis of Financial Condition and Results of Operations Corbus reported a net loss of $55.7 million in 2018, driven by increased R&D expenses, with subsequent financing expected to fund operations into Q4 2020 Results of Operations (2018 vs. 2017) In 2018, Corbus's net loss increased to $55.7 million from $32.4 million in 2017, primarily due to a substantial rise in R&D expenses Comparison of Operating Results (in thousands) | Account | 2018 | 2017 | Change | | :--- | :--- | :--- | :--- | | Revenue from awards | $4,822 | $2,440 | $2,382 | | Research and Development | $48,614 | $26,039 | $22,575 | | General and Administrative | $12,956 | $8,964 | $3,992 | | Net Loss | ($55,672) | ($32,422) | ($23,250) | - The increase in R&D expense was mainly due to a $17.5 million increase in clinical trial costs and a $4.0 million increase in compensation costs[428] - The increase in G&A expense was driven by higher compensation ($1.4 million), stock-based compensation ($0.9 million), and legal costs ($0.8 million)[430] Liquidity and Capital Resources As of December 31, 2018, Corbus had $41.7 million in cash, bolstered by subsequent financing expected to fund operations into Q4 2020 - The company held cash and cash equivalents of $41.7 million at December 31, 2018[434] - Net cash used in operating activities for 2018 was approximately $30.1 million[435] - In January 2019, the company entered a collaboration with Kaken for a $27 million upfront payment and completed a public offering for approximately $37.6 million in net proceeds[440][441] - Current cash and subsequent financing are expected to fund operations into Q4 2020[442] Off-Balance Sheet Arrangements and Commitments The company has significant future payment obligations contingent on development and commercialization milestones, including agreements with CFF/CFFT, Jenrin, and Kaken - CFF/CFFT Awards: The company has contingent obligations to pay royalties and milestone payments to the Cystic Fibrosis Foundation and its affiliate based on commercial sales and other transactions related to lenabasum[451][452] - Jenrin License: Corbus is obligated to pay Jenrin up to $18.4 million in development and regulatory milestone payments for each compound developed from the licensed library, plus sales royalties[455] - Kaken Collaboration: Corbus is eligible to receive up to $173 million in milestone payments from Kaken. The upfront $27 million payment from Kaken triggers a $2.7 million royalty payment owed by Corbus to the CFF[458][452] Quantitative and Qualitative Disclosures About Market Risk The company's market risk is primarily limited to interest rate sensitivity on short-term cash and foreign currency exposure from its foreign subsidiaries - Primary market risk is interest income sensitivity on cash and cash equivalents, but due to their short-term nature, the impact of rate changes is not expected to be material[461] - The company has foreign exchange risk from cash held in British Pounds and Euros by its foreign subsidiaries[462] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2018 - Management concluded that as of December 31, 2018, the company's disclosure controls and procedures were effective[464] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2018[465] - As an emerging growth company, an attestation report from the independent registered public accounting firm on internal controls is not included[468] Part III Information for Part III, including details on Directors, Executive Officers, Compensation, and Related Transactions, is incorporated by reference from the 2019 proxy statement Directors, Executive Officers, Compensation, and Related Matters Information for Items 10-14, covering directors, executive compensation, and related matters, is incorporated by reference from the 2019 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the registrant's proxy statement for the 2019 annual meeting of stockholders[472][473][474][475][476] Part IV Exhibits, Financial Statement Schedules This section lists all documents filed as part of the Form 10-K, including consolidated financial statements and key material contracts - The consolidated financial statements and the report of EisnerAmper LLP are included in the filing[479] - The exhibit list includes key material contracts such as the Cystic Fibrosis Program Related Investment Agreement, the License Agreement with Jenrin Discovery, and the Collaboration and License Agreement with Kaken Pharmaceutical[486][487][489] Financial Statements and Notes Consolidated Financial Statements For 2018, Corbus reported a net loss of $55.7 million on $4.8 million revenue, with total assets decreasing to $47.0 million and liabilities increasing to $19.5 million Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2018 | Dec 31, 2017 | | :--- | :--- | :--- | | Cash and cash equivalents | $41,748 | $62,537 | | Total Assets | $46,989 | $66,978 | | Total Liabilities | $19,465 | $9,195 | | Total Stockholders' Equity | $27,524 | $57,784 | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2018 | Year Ended Dec 31, 2017 | | :--- | :--- | :--- | | Revenue from awards | $4,822 | $2,440 | | Operating Expenses | $61,570 | $35,003 | | Net Loss | ($55,672) | ($32,422) | | Net Loss Per Share | ($0.98) | ($0.65) | Notes to Consolidated Financial Statements The notes detail accounting policies, liquidity, and key agreements, including the adoption of ASC 606 and subsequent financing events expected to fund operations into Q4 2020 - Liquidity: Cash of $41.7 million at year-end, plus a subsequent $27 million upfront payment from Kaken and ~$37.6 million net from a public offering, are expected to fund operations into Q4 2020[524] - Revenue Recognition: The company adopted ASC 606 in 2018. Revenue from the 2018 CFF Award is recognized using an input method based on R&D costs incurred over the performance period[551][554] - Development Awards: The company has two awards from the Cystic Fibrosis Foundation (2015 and 2018) with contingent future royalty and milestone payment obligations upon commercialization of lenabasum[577][583] - Income Taxes: The company has federal net operating loss (NOL) carryforwards of approximately $82.5 million, but a full valuation allowance has been recorded against the resulting deferred tax assets[595][596] - Subsequent Events: Key events after Dec 31, 2018 include the Kaken collaboration agreement, a public offering raising ~$40.3 million gross, and an amendment to expand office lease space[622][629][630]