CORVUS PHARMACEUTICALS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and notes for the year endedDecember 31, 2020 , included in our Annual Report on Form 10-K filed with theU.S. Securities and Exchange Commission ("SEC") onMarch 25, 2021 . This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report entitled "Risk Factors." Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements. Overview
We are a clinical stage biopharmaceutical company. Our strategy is to focus our efforts on the development of immune modulator product candidates to treat cancers, T-cell lymphomas, and autoimmune diseases. We have built a pipeline of five programs, three of which are in clinical development. Our lead product candidate is mupadolimab (formerly CPI-006), a potent humanized monoclonal antibody that is designed to react with a specific site on CD73. In both preclinical and in vivo studies in cancer patients and patients with COVID-19, mupadolimab has demonstrated binding to various immune cells and the inducement of an enhanced humoral immune response. We believe mupadolimab has the potential to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad range of cancers and infectious diseases. InFebruary 2021 , we initiated a Phase 3 trial evaluating mupadolimab in a global, randomized, double-blind trial designed to evaluate the efficacy and safety of mupadolimab compared to placebo in hospitalized patients with mild-to-moderate COVID-19. OnJuly 15, 2021 , we announced that we discontinued our Phase 3 clinical trial due to positive trends exhibited by COVID-19 vaccines in lowering serious infection and hospitalizations due to COVID-19. The discontinuation was not related to any safety or efficacy issues observed in the trial patients. OnSeptember 21, 2021 , we published preliminary results of our discontinued Phase 3 trial. The primary endpoint of the trial was the proportion of patients free from respiratory failure or death within 28 days after receiving either mupadolimab 2mg/kg, 1mg/kg or placebo. Forty patients were enrolled in the clinical trial. In the 2mg/kg cohort, 93.3% of patients were alive and free from respiratory failure compared to 85.7% in the 1mg/kg cohort and 81.1% in the placebo. Secondary endpoints also favored mupadolimab treatment cohorts. Due to the number of participants enrolled in the trial before it was discontinued, the foregoing results were not sufficiently powered for statistical significance. Mupadolimab is a unique antibody that is designed to bind to a critical epitope involved in B cell signaling. Our work in both cancer and viral diseases, such as COVID-19, have provided important insights and data into how we may best utilize the biologic properties of our antibody candidate in the clinic. Our studies have uncovered a novel mechanism of action: mupadolimab is designed to activate B cells which may then be driven into antibody producing plasma cells by the presence of tumor associated antigens within the tumor. Recent work by two other academic groups have shown that B cells present within the tumors of head and neck cancers produce specific antibodies directed to tumor associated viral antigens. As published in Nature in 2020, other groups have also shown that B cell infiltration in other tumors are strong predictors of response to immunotherapies. Human papilloma virus ("HPV+") head and neck cancers are increasing in incidence inthe United States and are now more common than head and neck cancers associated with tobacco use. From 1990 to 2005 there was a 225% increase in HPV+ head and neck cancers with HPV believed to be the causative factor in approximately 75% of such cancer cases. HPV is also associated with cervical, anal, vulvar, penis and other cancers. Reflecting an increase in the importance of HPV+ cancers, they were the subject of this year's Karnofsky Lecture at theAmerican Society of Clinical Oncology ("ASCO") meeting inJune 2021 . More broadly, many other cancers are believed to be associated with or caused by viruses including hepatoma, lymphomas, brain tumors, skin cancer and others. We believe that, if successfully 21 Table of Contents
developed and approved, mupadolimab's mechanism and unique properties could
position it as new treatment option for these viral associated cancers. Other
tumors, such as non-small cell lung cancer ("NSCLC"), are also thought to
contain neoantigens within the tumors. These antigens are derived from mutations
that occur in the cancer cells. If sufficient immune responses to these antigens
can be generated, it could have a beneficial effect on tumor growth or response
to therapies. Various immunotherapies are now approved to enhance immune
responses to tumor antigens such as anti-PD1 antibodies.
In our ongoing Phase 1/1b cancer clinical trial with mupadolimab, we have
observed evidence of anti-tumor activity in NSCLC and in oropharyngeal head and
neck cancers. Based on these findings, during the second quarter, we began
enrolling an expansion cohort of up to 15 patients with advanced, HPV+ head and
neck cancer that have failed treatment with anti-PD-1 therapy and chemotherapy.
In this cohort, mupadolimab will be given in combination with pembrolizumab. Our
objective is to evaluate response rate in this expansion cohort. In the third
quarter of 2021, we began enrolling an expansion of up to 15 patients with
relapsed refractory NSCLC who have failed therapies with anti-PD(L)-1 therapy
and chemotherapy. In this cohort, mupadolimab will be given in combination with
pembrolizumab. Our objective is to evaluate response rate in this expansion
cohort.
Our next product candidate, CPI-818, is a selective, covalent inhibitor of ITK
and is in a multi-center Phase 1/1b clinical trial in patients with various
malignant T-cell lymphomas. CPI-818 is designed to inhibit the proliferation of
certain malignant T-cells, and we believe it also has the potential to regulate
the growth of abnormal T-cells involved in autoimmunity. CPI-818 is currently
being studied in a Phase 1/1b clinical trial in patients with several types of
advanced, refractory T cell lymphomas at sites in the United States , Australia ,
and South Korea . Interim data from the Phase 1/1b clinical trial of CPI-818 for
T cell lymphoma demonstrated tumor responses in very advanced, refractory,
difficult to treat T cell malignancies. As reported in December 2020 at the
meeting of the American Society of Hematology , of seven patients with PTCL,
there had been one complete response lasting over 15 months and one partial
response lasting for over five months. In October 2021 , Angel Pharmaceuticals
received an IND approval notice from the Center for Drug Evaluation ("CDE") of
China for CPI-818. Angel plans to initiate a Phase 1/1b clinical trial of
CPI-818 in China for the treatment of refractory T cell lymphomas in early 2022,
with the potential to expand into autoimmune diseases over time.
Our third product candidate, ciforadenant (formerly CPI-444), is an oral, small
molecule antagonist of the A2A receptor for adenosine with which we completed a
Phase 2 expansion protocol in combination with Genentech, Inc.'s cancer
immunotherapy, Tecentriq® (atezolizumab) for patients with either advanced or
refractory renal cell cancer ("RCC"). Ciforadenant is designed to disable a
tumor's ability to subvert attack by the immune system by blocking the binding
of adenosine in the tumor microenvironment to the A2A receptor. We also
discovered the Adenosine Gene Signature, which has demonstrated the potential to
serve as a biomarker to identify patients most likely to respond to treatment
with ciforadenant. We have refined our strategy with ciforadenant and plan to
collaborate with the Kidney Cancer Consortium to evaluate ciforadenant in a
Phase 2 clinical trial in first-line therapy for metastatic RCC in combination
with pembrolizumab and another approved agent for RCC. The trial is expected to
enroll up to 60 patients and is intended to increase complete responses and deep
responses in the front-line setting. Preclinical studies and data from earlier
clinical trials with ciforadenant, indicate adenosine may be a cause of
resistance to current therapies with anti PD(L)-1. Tumor biopsies will be
evaluated for expression of the Adenosine Gene Signature.
To date, the majority of our efforts have been focused on the research,
development and advancement of mupadolimab, CPI-818 and ciforadenant, and we
have not generated any revenue from product sales and, as a result, we have
incurred significant losses. We expect to continue to incur significant research
and development and general and administrative expenses related to our
operations. Our net loss for the three and nine months ended September 30, 2021
was $10.7 million and $34.0 million , respectively. As of September 30, 2021 , we
had an accumulated deficit of $257.1 million . We expect to continue to incur
losses for the foreseeable future, and we anticipate these losses will increase
as we continue our development of, seek regulatory approval for and begin to
commercialize mupadolimab, CPI-818 and ciforadenant, and as we develop other
product candidates. Even if we achieve profitability in the future, we may not
be able to sustain profitability in subsequent periods.
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Since our inception and throughSeptember 30, 2021 , we have funded our operations primarily through the sale and issuance of stock. InMarch 2018 , in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of$8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters' exercise of their option to purchase additional shares of common stock. We received aggregate net proceeds of approximately$64.9 million , after underwriting discounts, commissions and offering expenses. InFebruary 2021 , we completed a follow-on public offering in which we sold 9,783,660 shares of common stock at a price of$3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters' exercise of their option to purchase additional shares of common stock. We received aggregate net proceeds of approximately$32.0 million , net of underwriting discounts and commissions and offering expenses. InMarch 2020 , we entered into an open market sales agreement (the "Sales Agreement") withJefferies LLC ("Jefferies") to sell shares of the Company's common stock, from time to time, with aggregate gross sales proceeds of up to$50,000,000 , through an at-the-market equity offering program under which Jefferies acts as our sales agent. Jefferies is entitled to compensation for its services equal to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreement. During the nine months endedSeptember 30, 2021 , we sold 6,609,605 shares under our at-the-market offering program resulting in net proceeds of$29.0 million . As ofSeptember 30, 2021 ,$18.9 million remained for sale under the Sales Agreement. InOctober 2020 , we announced the formation and launch ofAngel Pharmaceuticals Co., Ltd. ("Angel Pharmaceuticals "), a newChina based biopharmaceutical company with a mission to bring innovative quality medicines to Chinese patients for treatment of serious diseases including cancer, autoimmune diseases and infectious diseases. We formedAngel Pharmaceuticals as a wholly owned subsidiary and it launched with a post-money valuation of approximately$106.0 million , based on an approximate$41.0 million cash investment from a Chinese investor group that includes funds associated withTigermed and Betta Pharmaceuticals,Hisun Pharmaceuticals andZhejiang Puissance Capital . Such cash is not available for our use. Contemporaneously with the financing,Angel Pharmaceuticals licensed the rights to develop and commercialize our three clinical-stage candidates - mupadolimab, CPI-818 and ciforadenant - in greaterChina and obtained global rights to our BTK inhibitor preclinical programs. Under the collaboration, we currently have a 49.7% equity interest inAngel Pharmaceuticals , excluding 7% of Angel's equity reserved for issuance under the Angel ESOP, and are entitled to designate three individuals on Angel's five-person Board of Directors. As ofSeptember 30, 2021 , we had capital resources consisting of cash, cash equivalents and marketable securities of approximately$76.3 million . We do not expect our existing capital resources to be sufficient to enable us to fund the completion of all of our ongoing or planned clinical trials and remaining development program of any of mupadolimab, CPI-818 or ciforadenant through commercialization. In addition, our operating plan may change as a result of many factors, including those described in the section of this report entitled "Risk Factors" and others currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, debt financings or other sources, such as strategic collaborations. Such financing would result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates, including possible future revenue streams. In addition, additional funding may not be available to us on acceptable terms or at all and any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations. We currently have no manufacturing capabilities and do not intend to establish any such capabilities. We have no commercial manufacturing facilities for our product candidates. As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices. Impact of COVID-19 COVID-19 has placed strains on the providers of healthcare services, including the healthcare institutions where we conduct our clinical trials. These strains have resulted in institutions prohibiting the initiation of new clinical 23
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trials, enrollment in existing clinical trials and restricting the on-site monitoring of clinical trials. We also follow FDA guidance on clinical trial conduct during the COVID-19 pandemic, including the remote monitoring of clinical data.
In alignment with public health guidance designed to slow the spread of COVID-19, as ofmid-March 2020 , we implemented a reduced onsite staffing model and transitioned to a remote work plan for all employees other than those providing essential services, such as our laboratory staff. InJuly 2021 , we started transitioning back to office work for employees not providing essential services. For our onsite employees, we have implemented heightened health and safety measures designed to comply with applicable federal, state and local guidelines in response to the COVID-19 pandemic. We are further supporting all of our employees by leveraging virtual meeting technology and encouraging employees to follow local health authority guidance. We may need to undertake additional actions that could impact our operations if required by applicable laws or regulations or if we determine such actions to be in the best interests of our employees.
Significant Accounting Policies
Our significant accounting policies are described in Note 2 to our consolidated financial statements for the year endedDecember 31, 2020 included in our Annual Report on Form 10-K. There have been no material changes to our significant accounting policies during the nine months endedSeptember 30, 2021 .
Components of Results of Operations
Revenue To date, we have not generated any revenues. We do not expect to receive any revenues from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into revenue-generating collaboration agreements with third parties.
Research and Development Expense
Our research and development expenses consist primarily of costs incurred to conduct research and development of our product candidates. We record research and development expenses as incurred. Research and development expenses include:
? employee-related expenses, including salaries, benefits, travel and non-cash
stock-based compensation expense;
external research and development expenses incurred under arrangements with
? third parties, such as contract research organizations, preclinical testing
organizations, contract manufacturing organizations, academic and non-profit
institutions and consultants;
? costs to acquire technologies to be used in research and development that have
not reached technological feasibility and have no alternative future use;
? license fees; and
? other expenses, which include direct and allocated expenses for laboratory,
facilities and other costs.
We plan to increase our research and development expenses substantially as we continue the development and potential commercialization of our product candidates. Our current planned research and development activities include
the following:
? enrollment and completion of our Phase 1/1b clinical trial of mupadolimab in
patients with NSCLC and advanced, HPV+ head and neck cancer;
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? enrollment and completion of our ongoing Phase 1/1b clinical trial of CPI-818;
? enrollment and completion of our Phase 2 clinical trials of mupadolimab;
? process development and manufacturing of drug supply of mupadolimab, CPI-818
and ciforadenant; and
? preclinical studies under our other programs in order to select development
product candidates.
In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business.
Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion. The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in "Part II, Item 1A-Risk Factors." As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses include personnel costs, expenses for outside professional services and allocated expenses. Personnel costs consist of salaries, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expense related to our office and research and development facility.
We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of one or more of our product candidates.
Results of Operations
Comparison of the periods below as indicated (in thousands):
Three Months Ended Nine Months Ended
September 30, September 30,
2021 2020 Change 2021 2020 Change
Operating expenses:Research and development$ 6,991 $ 6,619 $ 372 $ 24,327 $ 24,639 $ (312) General and administrative 2,056 3,226 (1,170) 7,493 9,242 (1,749) Total operating expenses 9,047 9,845 (798) 31,820 33,881 (2,061) Loss from operations (9,047) (9,845) 798 (31,820) (33,881) 2,061 Interest income and other expense, net (11) 49 (60) (7) 539 (546)
Sublease income - related party 94 - 94 94 - 94 Loss from equity method investment (1,709) - (1,709) (2,272) - (2,272) Net loss$ (10,673) $ (9,796) $ (877) $ (34,005) $ (33,342) $ (663) 25 Table of Contents
Research and Development Expense
Research and development expenses for the three and nine months endedSeptember 30, 2021 and 2020 consisted of the following costs by program (specific program costs consist solely of external costs)(in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 Change 2021 2020 Change Ciforadenant (formerly CPI-444)$ 319 $ 869 $ (550) $ 1,180 $ 3,131 $ (1,951) Mupadolimab (formerly CPI006) 3,349 1,415 1,934 12,316 6,048 6,268 CPI-818 535 610 (75) 1,125 2,349 (1,224) Other programs 38 9 29 46 821 (775) Unallocated employee and overhead costs 2,750 3,716 (966) 9,660 12,290 (2,630)$ 6,991 $ 6,619 $ 372 $ 24,327 $ 24,639 $ (312)
For the three months ended
For the nine months endedSeptember 30, 2021 , the decrease in ciforadenant costs of$2.0 million as compared to the nine months endedSeptember 30, 2020 , primarily consisted of a decrease of$1.6 million in clinical trial expenses and a decrease of$0.4 million in other outside service costs. For the three months endedSeptember 30, 2021 , the increase in mupadolimab costs of$1.9 million as compared to the three months endedSeptember 30, 2020 , primarily consisted of an increase of$1.1 million in clinical trial expenses and an increase of$0.8 million in drug manufacturing costs. For the nine months endedSeptember 30, 2021 , the increase in mupadolimab costs of$6.3 million as compared to the nine months endedSeptember 30, 2020 , primarily consisted of an increase of$4.4 million in clinical trial expenses, an increase of$0.4 million in licensing expense, an increase of$1.4 million in drug manufacturing costs and in increase of$0.1 million in other outside service costs. For the three months endedSeptember 30, 2021 , the decrease in CPI-818 costs of$0.1 million as compared to the three months endedSeptember 30, 2020 , primarily consisted of a decrease$0.2 million in clinical trial expenses, which were partially offset by an increase of$0.1 million in drug manufacturing costs. For the nine months endedSeptember 30, 2021 , the decrease in CPI-818 costs of$1.2 million as compared to the nine months endedSeptember 30, 2020 , primarily consisted of a decrease of$0.9 million in clinical trial expenses, a decrease of$0.2 million in drug manufacturing costs, and a decrease of$0.1 million
in other outside service costs.
For the three months ended
For the nine months endedSeptember 30, 2021 , the decrease in other program costs of$0.8 million as compared to the nine months endedSeptember 30, 2020 , primarily consisted of a decrease of$0.7 million in drug manufacturing costs and a decrease of$0.1 million in other outside services costs . For the three months endedSeptember 30, 2021 , the decrease in unallocated costs of$1.0 million as compared to the three months endedSeptember 30, 2020 , primarily consisted of a decrease of$0.9 million in personnel and related costs and a decrease of$0.1 million in other outside service costs. For the nine months endedSeptember 30, 2021 , the decrease in unallocated costs of$2.6 million as compared to the nine months endedSeptember 30, 2020 , primarily consisted of a decrease of$2.2 million in personnel and related costs and a decrease of$0.4 million in other outside service costs. 26 Table of Contents
General and Administrative Expense
For the three months ended
For the nine months ended
Interest Income and Other Expense, net
For the three months endedSeptember 30, 2021 , the decrease in interest income and other expense, net of$0.1 million as compared to the three months endedSeptember 30, 2020 , primarily consisted of a decrease in interest income earned due to a decrease in interest rates. For the nine months endedSeptember 30, 2021 , the decrease in interest income and other expense, net of$0.5 million as compared to the nine months endedSeptember 30, 2020 , primarily consisted of a decrease in interest income earned due to a decrease in interest rates.
Sublease Income -
For the three and nine months endedSeptember 30, 2021 , sublease income of$0.1 million represents rental income associated with our building sublease toAngel Pharmaceuticals .
Loss from equity method investment
For the three months ended
For the nine months ended
Liquidity and Capital Resources
As ofSeptember 30, 2021 , we had cash, cash equivalents and marketable securities of$76.3 million , and an accumulated deficit of$257.1 million , compared to cash and cash equivalents and marketable securities of$44.3 million and an accumulated deficit of$223.1 million as ofDecember 31, 2020 . We have financed our operations primarily through private placements of convertible preferred stock and the sale of common stock. InMarch 2016 , we consummated our IPO and sold 4,700,000 shares of our common stock at a price of$15.00 per share, and inApril 2016 , sold 502,618 shares at a price of$15.00 per share pursuant to the partial exercise of the underwriters' option to purchase additional shares of common stock. We received net proceeds of approximately$70.6 million , after deducting underwriting discounts, commissions and offering expenses. Immediately prior to the consummation of our IPO, all outstanding shares of the convertible preferred stock were converted into common stock on a one-for-one basis. InMarch 2018 , in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of$8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters' exercise of their option to purchase additional shares of common stock. We received aggregate net proceeds of approximately$64.9 million , after underwriting discounts, commissions and offering expenses.
In
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option to purchase additional shares of common stock. We received aggregate net
proceeds of approximately
InMarch 2020 , we entered into a Sales Agreement ("the "Sales Agreement") withJefferies LLC ("Jefferies") to sell shares of the Company's common stock, from time to time, with aggregate gross sales proceeds of up to$50.0 million , through an at the market equity offering program under which Jefferies acts as our sales agent. Jefferies is entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreement. During the nine months endedSeptember 30, 2021 , the Company sold 6,609,605 shares under its at-the-market offering program resulting in net proceeds of$29.0 million . As ofSeptember 30, 2021 ,$18.9 million remained for sale under the Sales Agreement. We believe our current cash, cash equivalents and marketable securities will be sufficient to fund our planned expenditures and meet our obligations through at least the next twelve months from the issuance of our financial statements as of and for the three and nine months endedSeptember 30, 2021 . The amounts and timing of our actual expenditures depend on numerous factors, including:
? the progress, timing, costs and results of clinical trials for mupadolimab,
CPI-818 and ciforadenant;
? the extent to which the COVID-19 coronavirus may impact our business, including
our clinical trials and financial condition;
? the timing, progress, costs and results of preclinical and clinical development
activities for our other product candidates;
? the number and scope of preclinical and clinical programs we decide to pursue;
? the costs involved in prosecuting, maintaining and enforcing patent and other
intellectual property rights;
? the cost and timing of regulatory approvals;
our efforts to enhance operational systems and hire additional personnel,
? including personnel to support development of our product candidates and
satisfy our obligations as a public company; and
? other factors described in the section of this report entitled "Risk Factors."
We expect to increase our spending in connection with the development and
commercialization of our product candidates. Until such time, if ever, as we can
generate substantial revenue from product sales, we expect to fund our
operations and capital funding needs through equity and/or debt financings. We
may also enter into additional collaboration arrangements or selectively partner
for clinical development and commercialization. The sale of additional equity
would result in dilution to our stockholders. The incurrence of debt financing
would result in debt service obligations and the governing documents would
likely include operating and financing covenants that would restrict our
operations. In addition, sufficient additional funding may not be available on
acceptable terms, or at all. If we are not able to secure adequate additional
funding, we may be forced to make reductions in spending, extend payment terms
with suppliers, liquidate assets where possible and/or suspend or curtail
planned programs. Any of these actions could have a material effect on our
business, financial condition and results of operations.
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