Corvus Pharmaceuticals(CRVS) - 2020 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Financial Statements (unaudited) Corvus Pharmaceuticals presents unaudited condensed consolidated financial statements, reporting a $10.6 million net loss for Q2 2020, an accumulated deficit of $240.7 million, and a decrease in total assets to $64.2 million Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $20,705 | $5,154 | | Marketable securities | $38,553 | $72,828 | | Total current assets | $60,561 | $79,344 | | Total assets | $64,177 | $83,646 | | Total current liabilities | $11,553 | $10,225 | | Total liabilities | $13,337 | $12,535 | | Accumulated deficit | ($240,691) | ($217,145) | | Total stockholders' equity | $50,840 | $71,111 | Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $7,857 | $10,640 | $18,020 | $20,059 | | General and administrative | $2,910 | $2,956 | $6,016 | $5,842 | | Total operating expenses | $10,767 | $13,596 | $24,036 | $25,901 | | Net loss | ($10,611) | ($12,978) | ($23,546) | ($24,621) | | Net loss per share | ($0.36) | ($0.44) | ($0.80) | ($0.84) | Condensed Consolidated Statements of Changes in Stockholders' Equity - Total stockholders' equity decreased from $71.1 million at December 31, 2019, to $50.8 million at June 30, 2020, primarily due to a $23.5 million net loss for the six-month period, partially offset by $3.2 million in stock-based compensation expense[14] Condensed Consolidated Statements of Cash Flows Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,839) | ($18,204) | | Net cash provided by investing activities | $34,367 | $9,185 | | Net cash provided by financing activities | $23 | $6 | | Net increase (decrease) in cash | $15,551 | ($9,013) | Notes to Condensed Consolidated Financial Statements - The company, a clinical-stage biopharmaceutical firm, has incurred significant losses since its 2014 inception, with an accumulated deficit of $240.7 million as of June 30, 2020[22][26] - As of June 30, 2020, the company held $59.3 million in cash, cash equivalents, and short-term marketable securities, which management believes are sufficient to support planned operations for at least the next 12 months[29][34] - Key license and collaboration agreements with Vernalis, Scripps, Genentech, and Monash University involve potential future milestone and royalty payments[52][56][59] - In March 2020, an at-the-market (ATM) equity offering program was established with Jefferies to sell up to $50 million of common stock, though no shares had been sold as of June 30, 2020[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management reviews the company's clinical-stage biopharmaceutical pipeline, reporting a $23.5 million net loss for H1 2020 and an accumulated deficit of $240.7 million, with $59.3 million in cash deemed sufficient for the next 12 months despite COVID-19 risks Overview and Product Pipeline - Corvus is a clinical-stage biopharmaceutical company with three main product candidates in clinical trials[89][90] - Ciforadenant (A2A receptor antagonist): In a Phase 2 expansion protocol for advanced renal cell cancer (RCC) and metastatic castration-resistant prostate cancer (mCRPC)[91][103] - CPI-006 (anti-CD73 antibody): In a Phase 1/1b trial for various cancers and a separate Phase 1 trial for patients with COVID-19[91][109][113] - CPI-818 (ITK inhibitor): In a Phase 1/1b trial for patients with T-cell lymphomas[91][120] Results of Operations Comparison of Operating Results (in thousands) | Period | Research & Development | General & Administrative | Net Loss | | :--- | :--- | :--- | :--- | | Q2 2020 | $7,857 | $2,910 | ($10,611) | | Q2 2019 | $10,640 | $2,956 | ($12,978) | | Change | ($2,783) | ($46) | $2,367 | | H1 2020 | $18,020 | $6,016 | ($23,546) | | H1 2019 | $20,059 | $5,842 | ($24,621) | | Change | ($2,039) | $174 | $1,075 | - The decrease in R&D expenses for Q2 2020 compared to Q2 2019 was primarily driven by reduced costs for the ciforadenant program ($0.8 million decrease) and the CPI-818 program ($0.7 million decrease)[137][138][143] - Interest income decreased by $0.5 million in Q2 2020 compared to Q2 2019, due to lower cash and marketable securities balances and a decline in interest rates[150] Liquidity and Capital Resources - As of June 30, 2020, the company had $59.3 million in cash, cash equivalents, and marketable securities, with an accumulated deficit of $240.7 million[153] - Management believes current capital resources are sufficient to fund planned operations for at least the next twelve months[157] - In March 2020, an at-the-market (ATM) sales agreement was established to sell up to $50 million of common stock, but no proceeds had been received as of June 30, 2020[156] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate exposure on its $59.3 million cash and investment portfolio, which management deems low-risk and not materially impacted by a hypothetical 10% interest rate increase - The company's main market risk is interest rate risk on its cash and investment portfolio[171] - The investment portfolio, consisting of bank deposits, money market funds, U.S. Treasury and government agency securities, and corporate debt, is considered low-risk with a short-term duration[171] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2020, with no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective as of the end of the period covered by the report[175] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[176] PART II — OTHER INFORMATION Legal Proceedings Corvus Pharmaceuticals is not currently involved in any material litigation or legal proceedings - As of the filing date, Corvus Pharmaceuticals is not involved in any material legal proceedings[179] Risk Factors The company faces significant risks including limited operating history, substantial financing needs, COVID-19 impact, early-stage product development failures, reliance on third parties, commercialization challenges, intellectual property issues, and stock price volatility Risks Related to Financial Condition and Capital Requirements - The company has a limited operating history, has incurred significant losses since its 2014 inception (accumulated deficit of $240.7 million as of June 30, 2020), and expects losses to continue[181][182] - Substantial additional financing is required to achieve goals, and failure to obtain it could force delays or termination of development programs[183][184] - The COVID-19 pandemic poses significant risks that could adversely impact business, clinical trials, and financial condition, including enrollment delays and supply chain interruptions[191][192] Risks Related to Discovery and Development - Product candidates are in early stages of development and may fail or suffer delays, which would materially harm the business[197][198] - Clinical drug development is a lengthy, expensive, and uncertain process; results from early trials are not necessarily predictive of future results[205][206] - Interim and preliminary data from clinical trials may change as more patient data becomes available, potentially resulting in material changes in final data[221][222] Risks Related to Reliance on Third Parties - The company relies on third parties, such as CROs and medical institutions, to conduct its clinical trials, and their poor performance could delay or derail development programs[257][258] - The company lacks internal manufacturing capabilities and is dependent on contract manufacturers, who are subject to significant cGMP regulations and potential supply disruptions[266][267] - Reliance on third parties requires sharing trade secrets, which increases the risk of misappropriation or disclosure[275][276] Risks Related to Commercialization - Successful commercialization depends on many factors, including regulatory approval, manufacturing scale-up, market acceptance, and competition[279][280] - Failure to obtain or maintain adequate coverage and reimbursement from government and private payors could limit the ability to market products and generate revenue[300][301] - The company faces intense competition from larger, better-funded pharmaceutical and biotech companies with more resources and established products[330][331][333] Risks Related to Intellectual Property - The company relies on license agreements for key product candidates like ciforadenant and CPI-006, and failure to comply could result in the loss of rights[392][393] - The company's success depends on its ability to obtain and maintain patent protection and protect trade secrets, which is an uncertain, expensive, and time-consuming process[398][403] - The company may be involved in costly and unsuccessful lawsuits to protect its patents or defend against claims of infringement on others' proprietary rights[406][413] Risks Related to Common Stock - The trading price of the company's common stock has been and could continue to be highly volatile[448] - As of June 30, 2020, executive officers, directors, and stockholders with over 5% ownership collectively held approximately 63% of the voting stock, giving them significant control over corporate matters[453][454] - The company is an 'emerging growth company' and its use of reduced reporting requirements may make its common stock less attractive to some investors[461][462] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - There were no unregistered sales of equity securities in the quarter[478] Defaults Upon Senior Securities The company reported no defaults upon its senior securities - None[480] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[480] Other Information No other information required for disclosure in this section was reported - None[480] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate governance documents and required CEO/CFO certifications - The report includes a list of all exhibits filed, including corporate governance documents and required CEO/CFO certifications[483]