Corvus Pharmaceuticals(CRVS) - 2019 Q4 - Annual Report

Part I Business Corvus Pharmaceuticals is a clinical-stage biopharmaceutical company developing targeted oncology therapies, with a pipeline of clinical and preclinical programs and a strategy focused on biomarker-driven patient selection and collaborations - Corvus Pharmaceuticals is a clinical-stage biopharmaceutical company focused on developing and commercializing precisely targeted oncology therapies, with five programs in its pipeline, three of which are in international multicenter trials[17] Product Pipeline Overview | Product Candidate | Target/Mechanism | Key Indication(s) | Development Stage | | :--- | :--- | :--- | :--- | | Ciforadenant | Adenosine A2A Receptor Antagonist | Renal Cell Cancer (RCC), Prostate Cancer (mCRPC) | Phase 1b/2 | | CPI-006 | Anti-CD73 Antibody | Multiple Cancers | Phase 1/1b | | CPI-818 | ITK Inhibitor | T-Cell Lymphoma | Phase 1/1b | | CPI-182 | Anti-CXCR2 Antibody | Multiple Cancers | IND-Enabling | | CPI-935 | Adenosine A2B Receptor Antagonist | Fibrosis, Cancer | Development Candidate Selected | - The company's strategy emphasizes leveraging immunology and oncology expertise, efficient adaptive clinical trial designs, developing standalone and combination therapies, biomarker-driven patient selection, and collaborative relationships[30][31][33][34][35] - Corvus relies on third-party contract manufacturers for clinical and potential commercial supply of its product candidates, enabling an efficient infrastructure and focus on development[97] Ciforadenant (A2A Receptor Antagonist) Ciforadenant, an oral A2A receptor antagonist, is in Phase 2 trials for RCC and mCRPC, showing anti-tumor activity and well-tolerated profile, with an identified predictive biomarker and patent expiry in July 2029 - Ciforadenant, an oral A2A receptor antagonist, is being studied in combination with Genentech's Tecentriq (atezolizumab) for advanced, refractory renal cell cancer (RCC) and metastatic castration-resistant prostate cancer (mCRPC)[17][19] - Clinical trials indicate ciforadenant is well-tolerated, demonstrates anti-tumor activity as monotherapy and in combination, with RCC, mCRPC, and NSCLC appearing most responsive[19][21][61] - An adenosine gene expression signature has been identified, correlating with tumor response and progression-free survival in RCC patients, potentially serving as a predictive biomarker[21][34][67] Interim RCC Trial Results (Published Jan 2020) | Metric | Combination Therapy (ciforadenant + atezolizumab) | Monotherapy (ciforadenant) | | :--- | :--- | :--- | | Overall Survival (OS) | 90% at 25 months follow-up | 69% at 16 months follow-up | | Progression-Free Survival (PFS) | 5.8 months | 4.1 months | | Disease Control (>6 months) | 39% of patients | 17% of patients | | Confirmed Partial Response (PR) | 11% of patients | 1 patient | CPI-006 (Anti-CD73 Antibody) CPI-006, an immunomodulatory anti-CD73 monoclonal antibody, is in Phase 1/1b trials as monotherapy and in combination, showing novel immunomodulatory activities and tumor regression in RCC and mCRPC patients - CPI-006, an anti-CD73 monoclonal antibody, is in a Phase 1/1b trial as a single agent and in combination with ciforadenant and pembrolizumab, designed to inhibit adenosine production and stimulate immune cells[23][79] - Interim data indicates CPI-006 exhibits novel immunomodulatory activities, including B-cell differentiation and activation, with a recommended dose of 18 mg/kg for further study[81][82] - Tumor regression has been observed in predefined cohorts of patients with Renal Cell Carcinoma (RCC) and metastatic Castration-Resistant Prostate Cancer (mCRPC)[84] CPI-818 (ITK Inhibitor) CPI-818, a selective ITK inhibitor for T-cell lymphomas, initiated Phase 1/1b study in March 2019, showing good tolerability, target occupancy, and early clinical activity including lymphadenopathy reduction - CPI-818 is a selective, covalent inhibitor of ITK, an enzyme in T-cells, being developed for T-cell lymphomas, with a Phase 1/1b study initiated in March 2019[25][88] - As of February 2020, 16 patients enrolled in the dose-escalation phase showed no dose-limiting toxicities, with the drug well tolerated and achieving increasing target occupancy[91][93] - Early clinical activity includes lymphadenopathy reduction in one Cutaneous T-cell Lymphoma (CTCL) patient and improved cutaneous disease in another CTCL patient[92] Licenses and Collaborations Corvus maintains key licensing agreements for ciforadenant (Vernalis), CPI-006 (Scripps), and an anti-CXCR2 antibody (Monash University), alongside clinical trial collaborations with Genentech for ciforadenant and Tecentriq Key Licensing and Collaboration Agreements | Partner | Asset/Program | Key Financial Terms | | :--- | :--- | :--- | | Vernalis | Ciforadenant | $1.0M upfront, $3M milestone paid, up to ~$220M total milestones, mid-single to low-double digit royalties | | Scripps | CPI-006 | $10k upfront, $25k annual fee, up to $2.6M milestones, low-single digit royalties | | Genentech | Ciforadenant + Tecentriq | Two clinical trial collaborations. Corvus is responsible for its Phase 1/1b trial costs; costs are shared for the Phase 1b/2 Morpheus trial. Genentech supplies Tecentriq | | Monash University | Anti-CXCR2 Antibody (CPI-182) | $275k upfront, $25k annual fee, up to $45.1M milestones, low-single digit royalties | Regulation The company's products are subject to extensive FDA and international regulation, requiring multi-phase clinical trials and compliance with manufacturing, marketing, and safety reporting, alongside broader healthcare laws and reform measures - The FDA drug development process mandates preclinical studies, IND submission, and adequate human clinical trials (Phase 1, 2, and 3) prior to NDA or BLA submission[126][129][130][131] - The FDA offers expedited development and review programs, including Fast Track, priority review, accelerated approval, and Breakthrough Therapy Designation, for drugs addressing serious conditions and unmet medical needs[149][152][153][154] - The company is subject to various healthcare laws, including the federal Anti-Kickback Statute, False Claims Act, HIPAA, and the Physician Payments Sunshine Act, which restrict pharmaceutical business practices[186][188] - Healthcare reform, including the Affordable Care Act (ACA), and other cost-containment measures by government and third-party payors may impact product coverage, reimbursement, and pricing if approved[196][198][200] Risk Factors The company faces significant risks including limited operating history, substantial losses, need for future financing, high development uncertainty, reliance on third parties, commercialization challenges, intellectual property protection, competition, product liability, cybersecurity, and stock price volatility - The company has a limited operating history, incurring $217.1 million in accumulated deficit as of December 31, 2019, and anticipates significant losses for the foreseeable future[215][216] - Substantial additional financing is required, and failure to obtain necessary capital could delay, reduce, or terminate product development and commercialization efforts[218][221] - Product candidates are in early development stages, and clinical drug development is a lengthy, expensive process with uncertain outcomes, where early trial results are not necessarily predictive of future results[226][237] - The company relies on third parties for clinical trials and manufacturing, and their unsatisfactory performance could delay or prevent product candidate development and commercialization[280][287][289] - Protecting intellectual property is crucial, as the company faces risks of patent invalidation, third-party infringement claims, and potential loss of trade secrets[408][412][421] Unresolved Staff Comments None Properties The company leases approximately 27,280 square feet of office and research and development facilities in Burlingame, California, with the lease expiring in 2023 - The company leases approximately 27,280 square feet of office and R&D space in Burlingame, CA, with the lease expiring in 2023[492] Legal Proceedings The company is not currently a party to any material legal proceedings Mine Safety Disclosures Not applicable Part II Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Corvus Pharmaceuticals' common stock trades on The Nasdaq Global Market under "CRVS", with approximately 25 stockholders of record as of March 9, 2020, and the company has never paid cash dividends nor anticipates doing so, retaining earnings for business operations - The company's common stock is listed on The Nasdaq Global Market under the symbol "CRVS"[497] Quarterly Stock Price Range (2018-2019) | Period | High ($) | Low ($) | | :--- | :--- | :--- | | 2019 Q4 | 5.10 | 2.53 | | 2019 Q3 | 8.10 | 2.91 | | 2019 Q2 | 4.75 | 3.23 | | 2019 Q1 | 5.44 | 3.55 | | 2018 Q4 | 9.19 | 3.22 | | 2018 Q3 | 11.53 | 8.50 | | 2018 Q2 | 13.91 | 9.05 | | 2018 Q1 | 11.64 | 7.42 | - The company has never declared or paid cash dividends and does not anticipate paying any in the foreseeable future[500] Selected Financial Data This section summarizes the company's financial data from 2015 to 2019, highlighting consistent operating losses, a $46.7 million net loss in 2019, $38.0 million in R&D expenses, and $78.0 million in cash, cash equivalents, and marketable securities as of December 31, 2019 Selected Financial Data (in thousands, except per share data) | | 2019 | 2018 | 2017 | 2016 | 2015 | | :--- | :--- | :--- | :--- | :--- | :--- | | Statements of Operations Data | | | | | | | Research and development | $37,975 | $38,586 | $46,305 | $29,356 | $11,352 | | General and administrative | $10,879 | $10,636 | $10,219 | $7,620 | $2,418 | | Loss from operations | $(48,854) | $(49,222) | $(56,524) | $(36,976) | $(13,770) | | Net loss | $(46,672) | $(46,939) | $(55,663) | $(36,375) | $(31,335) | | Net loss per share, basic and diluted | $(1.59) | $(1.71) | $(2.72) | $(2.36) | $(83.86) | | Balance Sheet Data (End of Period) | | | | | | | Cash, cash equivalents and marketable securities | $77,982 | $114,597 | $90,055 | $134,896 | $94,386 | | Total assets | $83,646 | $118,232 | $94,775 | $140,150 | $98,459 | | Total stockholders' equity (deficit) | $71,111 | $110,336 | $84,835 | $132,801 | $(31,101) | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2019, Corvus Pharmaceuticals reported a net loss of $46.7 million, with R&D expenses decreasing to $38.0 million due to reduced ciforadenant costs offset by increased spending on CPI-006 and CPI-818 trials, ending the year with $78.0 million in cash, sufficient for the next 12 months Comparison of Operating Results (in thousands) | | Year Ended Dec 31, 2019 | Year Ended Dec 31, 2018 | Change | | :--- | :--- | :--- | :--- | | Research and development | $37,975 | $38,586 | $(611) | | General and administrative | $10,879 | $10,636 | $243 | | Total operating expenses | $48,854 | $49,222 | $(368) | | Loss from operations | $(48,854) | $(49,222) | $368 | | Net loss | $(46,672) | $(46,939) | $267 | Research & Development Expense by Program (in thousands) | Program | 2019 | 2018 | Change | | :--- | :--- | :--- | :--- | | Ciforadenant | $5,750 | $10,378 | $(4,628) | | CPI-006 | $6,774 | $6,108 | $666 | | CPI-818 | $6,577 | $4,707 | $1,870 | | Other programs | $981 | $877 | $104 | | Unallocated employee and overhead | $17,893 | $16,516 | $1,377 | | Total R&D Expense | $37,975 | $38,586 | $(611) | - The $4.628 million decrease in ciforadenant costs in 2019 was primarily due to lower drug manufacturing costs ($2.8 million) and reduced clinical trial expenses ($1.3 million) as enrollment focused on RCC and mCRPC patients[529] - As of December 31, 2019, the company held $78.0 million in cash, cash equivalents, and marketable securities, which management believes are sufficient to support planned operations for at least the next 12 months[543][546] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk stems from interest rate changes affecting its $78.0 million portfolio of cash, cash equivalents, and marketable securities as of December 31, 2019, though management believes a 10% interest rate increase would not materially impact its fair value due to the portfolio's short-term, low-risk nature - The company's primary market risk relates to interest rate changes on its $78.0 million portfolio of cash, cash equivalents, and marketable securities[570] - Due to the short-term and low-risk nature of the investment portfolio, the company does not believe interest rate fluctuations would materially affect its fair market value[570] Financial Statements and Supplementary Data This section presents the company's audited financial statements for fiscal years ended December 31, 2019, 2018, and 2017, including Balance Sheets, Statements of Operations and Comprehensive Loss, Statements of Changes in Stockholders' Equity, and Statements of Cash Flows, along with accompanying notes Key Financial Statement Data (Year Ended Dec 31, 2019) | Metric | Amount (in thousands) | | :--- | :--- | | Balance Sheet | | | Total Assets | $83,646 | | Total Liabilities | $12,535 | | Total Stockholders' Equity | $71,111 | | Statement of Operations | | | Total Operating Expenses | $48,854 | | Net Loss | $(46,672) | | Net Loss Per Share | $(1.59) | | Statement of Cash Flows | | | Net Cash Used in Operating Activities | $(37,321) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2019, with no material changes during the fiscal year, and no auditor attestation report is required as an emerging growth company - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2019[699] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2019, based on the COSO 2013 framework[701] - As an emerging growth company, the company is exempt from the requirement to include an auditor's attestation report on internal controls[704] Other Information Not applicable Part III Directors, Executive Officers and Corporate Governance This section details the company's board of directors and executive officers as of January 31, 2020, highlighting the classified board structure, Dr. Richard A. Miller's leadership, the three standing committees (Audit, Compensation, Nominating and Corporate Governance), and the company's risk oversight framework and code of conduct - The Board of Directors is classified into three classes with staggered three-year terms[711] - The board has three standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Corporate Governance Committee[730] - Risk oversight is administered by the board as a whole, with specific responsibilities delegated to the Audit Committee (financial risk), Nominating and Governance Committee (governance guidelines), and Compensation Committee (compensation-related risk)[729] Executive Compensation This section details 2019 compensation for non-employee directors and named executive officers (NEOs), including CEO Richard A. Miller ($1.1 million), CFO Leiv Lea ($0.75 million), and CMO Mehrdad Mobasher ($1.36 million), comprising base salary, bonuses, and stock options, alongside change in control and severance benefits 2019 Director Compensation | Name | Fees Earned in Cash ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | | Ian T. Clark | 45,000 | 38,552 | 83,552 | | Elisha P. (Terry) Gould III | 43,000 | 38,552 | 81,552 | | Linda S. Grais, M.D. J.D. | 32,667 | 123,622 | 156,289 | | Steve E. Krognes | 51,000 | 38,552 | 89,552 | | Scott W. Morrison | 61,000 | 38,552 | 99,552 | | Peter Thompson, M.D. | 47,000 | 38,552 | 85,552 | 2019 Summary Compensation Table (NEOs) | Name and Principal Position | Year | Salary ($) | Bonus ($) | Option Awards ($) | Total ($) | | :--- | :--- | :--- | :--- | :--- | :--- | | Richard A. Miller, M.D. (CEO) | 2019 | 300,000 | — | 795,039 | 1,098,039 | | Leiv Lea (CFO) | 2019 | 349,308 | — | 397,520 | 749,828 | | Mehrdad Mobasher, M.D. (CMO) | 2019 | 406,731 | 245,000 | 702,425 | 1,357,156 | - The company has employment agreements with its NEOs providing for severance payments and accelerated vesting of equity awards upon certain termination events, including change in control[789] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of January 31, 2020, executive officers and directors as a group beneficially owned approximately 13.8% of outstanding common stock, with major shareholders including OrbiMed Private Investments V, L.P. (24.21%), Adams Street Partners (11.72%), Novo Holdings A/S (10.47%), and BVF, Inc. (9.99%), based on 27,953,233 shares outstanding Security Ownership of 5% and Greater Stockholders (as of Jan 31, 2020) | Name of Beneficial Owner | Number of Shares Beneficially Owned | Percent of Total | | :--- | :--- | :--- | | OrbiMed Private Investments V, L.P. | 6,767,584 | 24.21% | | Entities affiliated with Adams Street Partners | 3,275,616 | 11.72% | | Novo Holdings A/S | 2,927,560 | 10.47% | | BVF, Inc. | 2,921,177 | 9.99% | - All executive officers and directors as a group beneficially owned 13,814,000 shares, representing a significant ownership stake[802][816] Certain Relationships and Related Transactions, and Director Independence The company has a written policy for reviewing and approving related party transactions, overseen by the audit committee, and the board has determined all directors, except CEO Dr. Richard A. Miller, are independent under Nasdaq listing requirements - The company has adopted a written policy for the review and approval of related party transactions, overseen by the audit committee[823] - The Board of Directors has determined that all directors are independent under Nasdaq listing requirements, with the exception of Dr. Miller, who is an employee of the company[829] Principal Accounting Fees and Services This section details fees billed by PricewaterhouseCoopers LLP, the company's independent registered public accounting firm, for fiscal years 2019 and 2018, with all services pre-approved by the audit committee Accountant Fees (in thousands) | Fee Category | Fiscal Year 2019 | Fiscal Year 2018 | | :--- | :--- | :--- | | Audit Fees | $551,000 | $625,226 | | Audit-Related Fees | — | — | | Tax Fees | — | — | | All Other Fees | $900 | $900 | | Total | $551,900 | $626,126 | Part IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K, with financial statements under Item 8 and schedules omitted if not applicable or provided elsewhere, alongside a detailed index of exhibits - The financial statements required by this item are filed under Item 8 of this report[841] - All financial statement schedules have been omitted because they are not applicable or the necessary information is included in the financial statements or notes[841] Form 10-K Summary The company has elected not to include a summary of the information required by Form 10-K under this optional item