Corbus Pharmaceuticals(CRBP) - 2020 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements For Q1 2020, the company reported a net loss of $29.7 million, total assets increased to $65.2 million due to a $46.0 million public offering, and an accumulated deficit of $222.5 million raises going concern doubts Condensed Consolidated Balance Sheet Data | Balance Sheet Items | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $46,617,921 | $31,748,686 | | Total current assets | $54,657,953 | $38,154,683 | | Total assets | $65,203,822 | $49,142,499 | | Total current liabilities | $34,652,696 | $34,887,706 | | Total liabilities | $42,512,332 | $42,984,934 | | Total stockholders' equity | $22,691,490 | $6,157,565 | | Accumulated deficit | ($222,480,758) | ($192,823,958) | Condensed Consolidated Statements of Operations | Income Statement Items | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Revenue from awards | $1,762,059 | $1,885,682 | | Research and development | $23,947,866 | $21,783,704 | | General and administrative | $7,699,479 | $6,624,747 | | Operating loss | ($29,885,286) | ($26,522,769) | | Net loss | ($29,656,800) | ($26,234,809) | | Net loss per share | ($0.43) | ($0.43) | Condensed Consolidated Statements of Cash Flows | Cash Flow Items | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($27,601,162) | $10,318,298 | | Net cash used in investing activities | ($463,605) | ($73,615) | | Net cash provided by financing activities | $42,934,002 | $37,926,647 | | Net increase in cash and cash equivalents | $14,869,235 | $48,171,330 | Notes to Unaudited Condensed Consolidated Financial Statements The company is a clinical-stage pharmaceutical firm focused on rare inflammatory and fibrotic diseases, facing substantial doubt about its going concern ability due to recurring losses and an accumulated deficit of $222.5 million, despite recent public offerings and key collaborations with Kaken Pharmaceutical and the CFF - The company is a clinical-stage pharmaceutical company focused on developing and commercializing novel therapeutics for rare, chronic, and serious inflammatory and fibrotic diseases[23] - The company has incurred recurring losses since inception, with an accumulated deficit of $222,480,758 as of March 31, 2020. Management has concluded there is substantial doubt about the company's ability to continue as a going concern without raising additional capital[25][28] - In February 2020, the company completed an underwritten public offering, selling 7,666,667 shares of common stock at $6.00 per share, for gross proceeds of $46.0 million[99] - The company has a collaboration agreement with Kaken Pharmaceutical to commercialize lenabasum in Japan for dermatomyositis and systemic sclerosis. Kaken made a $27 million upfront payment in March 2019, which was recognized as revenue in Q2 2019[74][77][85] - The company received a development award from the Cystic Fibrosis Foundation (CFF) for up to $25 million to support a Phase 2b clinical trial of lenabasum. Revenue from this award was $1.76 million for the three months ended March 31, 2020[87][93] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The company, a Phase 3 clinical-stage pharmaceutical company developing lenabasum for inflammatory and fibrotic diseases, reported a Q1 2020 net loss of $29.7 million due to increased R&D and G&A expenses, raised $43 million net from a public offering, but requires significant additional capital to fund operations beyond Q4 2020, with COVID-19 posing further risks - The company is a Phase 3 clinical-stage pharmaceutical company developing novel therapeutics for chronic inflammatory and fibrotic diseases by targeting the human endocannabinoid system (ECS)[118] - Lead drug candidate, lenabasum, is being evaluated in a Phase 3 SSc study, a Phase 2b CF study (both with top-line data expected in summer 2020), and a Phase 3 DM study[120] - The company has taken precautionary measures due to COVID-19, including remote work and monitoring. The pandemic may disrupt clinical trials, patient enrollment, and supply chains[125][126] - Cash and cash equivalents of $46.6 million at March 31, 2020, plus an expected $7.5 million from the CFF Award, are projected to be sufficient to fund operations into the fourth quarter of 2020[167] - The company will need to raise significant additional capital to continue funding operations and clinical trials for lenabasum. The COVID-19 pandemic may negatively affect the ability to raise capital[168][169] Results of Operations For Q1 2020, revenue from the CFF award slightly decreased to $1.8 million, while research and development expenses increased by $2.2 million to $23.9 million, and general and administrative expenses rose by $1.1 million to $7.7 million, primarily due to higher compensation and clinical trial costs Comparison of Operating Expenses (Q1 2020 vs Q1 2019) | Expense Category | Three Months Ended March 31, 2020 | Three Months Ended March 31, 2019 | Change | | :--- | :--- | :--- | :--- | | Revenue from awards | $1,762,059 | $1,885,682 | ($123,623) | | Research and Development | $23,948,000 | $21,784,000 | +$2,164,000 | | General and Administrative | $7,699,000 | $6,625,000 | +$1,074,000 | - The increase in R&D expenses was primarily due to a $2.3 million increase in compensation costs and a $270,000 increase in clinical trial costs, offset by a $431,000 decrease in stock-based compensation[153] - The increase in G&A expenses was driven by higher costs for compensation ($1.3M), legal/audit services ($0.5M), stock-based compensation ($0.5M), and market research ($0.5M). This was partially offset by a non-recurring $2.7M royalty payment to CFF made in Q1 2019[157] Liquidity and Capital Resources As of March 31, 2020, the company had working capital of approximately $20.0 million, with net cash used in operations of $27.6 million, while financing activities provided $42.9 million from a public offering, with existing cash projected to fund operations only into Q4 2020, necessitating further capital raises - As of March 31, 2020, the company had working capital of approximately $20,005,000[161] - Net cash used in operating activities for Q1 2020 was approximately $27.6 million[162] - Cash provided by financing activities in Q1 2020 was approximately $42.9 million, mainly from a public offering that raised $46.0 million in gross proceeds[164] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure is primarily limited to short-term cash and cash equivalents, with immaterial interest rate exposure and foreign currency exposure from holdings in British Pounds, Euros, and Australian Dollars - Market risk exposure is limited to cash and cash equivalents with maturities of three months or less. The primary risk is interest income sensitivity to U.S. interest rate changes, which is not expected to be material[185] - The company has foreign currency exposure from cash held in the United Kingdom (British Pounds, Euros) and Australia (Australian Dollars), as its functional currency is the U.S. Dollar[186] Item 4. Controls and Procedures Management concluded that as of March 31, 2020, the company's disclosure controls and procedures were not effective due to previously disclosed material weaknesses in internal controls over financial reporting, with no material changes occurring during Q1 2020 - The principal executive officer and principal financial officer concluded that as of March 31, 2020, the company's disclosure controls and procedures were not effective[188] - The ineffectiveness was attributed to material weaknesses in internal controls over financial reporting, as previously disclosed in the Form 10-K for the year ended December 31, 2019[188] - No changes in internal control over financial reporting occurred during Q1 2020 that have materially affected, or are reasonably likely to materially affect, these controls[189] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company is not currently subject to any material legal proceedings, though it may become a party to various legal proceedings in the ordinary course of business - The company is not currently subject to any material legal proceedings[191] Item 1A. Risk Factors No material changes to risk factors from the 2019 Annual Report were reported, except for new risks related to the COVID-19 pandemic, which could adversely affect business operations, clinical trials, manufacturing, and financial condition - There have been no material changes to risk factors from the Annual Report on Form 10-K for the year ended December 31, 2019, other than new risks related to the COVID-19 pandemic[192] Risks Related to COVID-19 The COVID-19 pandemic poses significant risks to the company's operations, potentially disrupting clinical trials, manufacturing, supply chains, and access to capital, which could delay approvals and adversely affect financial results - The COVID-19 pandemic could materially and adversely affect the company's business, financial condition, and results of operations[194] - The pandemic could adversely impact clinical trial operations, including patient recruitment, site travel, and data monitoring. One clinical trial site has already withdrawn from an open-label study due to COVID-19[200] - Manufacturing operations, including active pharmaceutical ingredient production in China and Italy, could be disrupted, limiting the ability to manufacture or ship materials[198] - Disruption of global financial markets from the pandemic could reduce the company's ability to access capital and negatively affect liquidity[199] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[206] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - None[206] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[206] Item 5. Other Information The company reported no other information for this item - None[206] Item 6. Exhibits This section lists the exhibits filed with the quarterly report, including amended employment agreements for key executives, CEO and CFO certifications, and XBRL data files - Exhibits filed include amended and restated employment agreements for the CEO, CMO, CFO, CCO, and Head of CMC, as well as required CEO/CFO certifications and XBRL data[207]