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CRIS > SEC Filings for CRIS > Form 10-Q on 31-Oct-2011All Recent SEC Filings

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Form 10-Q for CURIS INC


31-Oct-2011

Quarterly Report


Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read in conjunction with the condensed consolidated financial statements and the related notes appearing elsewhere in this report.

Overview

We are a drug discovery and development company that is committed to leveraging our innovative signaling pathway drug technologies in seeking to develop next generation network-targeted cancer therapies. We are building upon our experience in modulating signaling pathways, including the Hedgehog signaling pathway, in our effort to develop network-targeted cancer therapies. We conduct our research and development programs both internally and through strategic collaborations.

Hedgehog Pathway Inhibitor Program

Vismodegib. Our most advanced program is our Hedgehog pathway inhibitor program under collaboration with Genentech, Inc., a member of the Roche Group. The lead drug candidate being developed under this program is vismodegib, a first-in-class orally-administered small molecule Hedgehog pathway inhibitor, which is also referred to as GDC-0449 and RG3616.

Vismodegib is designed to selectively inhibit signaling in the Hedgehog pathway by targeting a protein called Smoothened. The Hedgehog signaling pathway plays an important role in regulating proper growth and development in the early stages of life and becomes less active in adults. However, mutations in the pathway that reactivate Hedgehog signaling are seen in certain cancers, including basal cell carcinoma (BCC). Abnormal signaling in the Hedgehog pathway is implicated in over 90% of BCC cases.

In September 2011, Genentech submitted a New Drug Application (NDA) to the U.S. Food and Drug Administration (FDA) seeking sales and marketing approval for vismodegib to treat people with advanced BCC, which includes BCC patients for whom surgery is considered inappropriate. We currently expect that the FDA will respond to Genentech's submission in early November 2011. Provided that the FDA accepts and files for review this NDA submission, we will earn an $8,000,000 milestone payment from Genentech. We intend to recognize this $8,000,000 payment as license revenue during the fourth quarter of 2011 because we do not have any further substantive performance obligations under the collaboration. If vismodegib receives FDA approval, we will also be entitled to receive an additional milestone payment as well as royalties on any future sales.

Genentech's NDA application was based on positive clinical data from ERIVANCE BCC/SHH4476g, a pivotal phase II study of vismodegib in patients with advanced BCC. The study met its primary endpoint showing that vismodegib substantially shrank tumors or healed visible lesions, with observed response rates of 43% of patients in the locally advanced BCC cohort and 30% of patients in the metastatic BCC cohort as assessed by an independent review facility. The most common adverse events observed in the study (observed in greater than 20% of patients) included muscle spasms, hair loss, altered taste sensation, weight loss, fatigue, nausea, decreased appetite, and diarrhea. ERIVANCE BCC/SHH4476g is an international, single-arm, multi-center, two-cohort, open-label phase II study that enrolled 104 patients with advanced BCC, including metastatic
(33) and/or locally advanced BCC (71), defined as patients whose lesions are inappropriate for surgery (inoperable, or for whom surgery would result in substantial deformity) and for which radiotherapy was unsuccessful or contraindicated. Metastatic BCC was defined as BCC that had spread to other parts of the body, including the lymph nodes, lung, bones and/or internal organs. The study was conducted at 31 sites in the United States, Australia and Europe. Study participants received 150mg vismodegib orally, once daily until disease progression or intolerable toxicity. Tumor responses for metastatic BCC were measured by RECIST criteria and for locally advanced BCC by a novel composite endpoint which included reduction of size of lesions of at least 30% in longest dimension and/or complete resolution of locally advanced BCC ulceration.

The primary endpoint of the study was objective response rate as assessed by an independent review facility, with secondary endpoints including investigator-assessed objective response rate, progression-free survival, overall survival, and duration of response in all evaluable patients, including locally advanced BCC or metastatic BCC patients. In addition, absence of residual BCC in patients was assessed by sampling biopsies in patients with locally advanced BCC. Genentech had previously reported Phase I clinical trial results in the New England Journal of Medicine in which an investigator-assessed response rate of 55% was observed in 33 patients with advanced BCC treated with vismodegib, including those with locally advanced BCC or metastatic BCC. In the pivotal Phase II trial, study investigators assessed the overall response rate


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to be 55%, with 60% in the locally advanced BCC cohort, and 46% in metastatic BCC cohort. The overall response rate in the pivotal Phase II trial as assessed by an independent review facility showed vismodegib substantially shrank tumors or healed visible lesions, with observed response rates of 43% of patients in the locally advanced BCC cohort and 30% of patients in the metastatic BCC cohort. The median duration of progression-free survival by independent review for both metastatic and locally advanced BCC patients was 9.5 months. The median duration of response by independent review was 7.6 months for both metastatic and locally advanced BCC patients. The median duration of response as assessed by study investigators was 12.9 and 7.6 months for metastatic BCC and locally advanced BCC patients, respectively. There was no residual BCC in sampling biopsies of 54% of locally advanced BCC patients. As of the November 26, 2010, data cutoff date, there were 19 (57.6%) metastatic BCC and 32 (45.1%) locally advanced BCC patients remaining on treatment. The median duration on treatment as of this date was 10 and 9.7 months for metastatic BCC and locally advanced BCC patients, respectively.

The most common adverse events observed in the study (observed in greater than 20% of patients) included muscle spasms, hair loss, altered taste sensation, weight loss, fatigue, nausea, decreased appetite, and diarrhea. Serious adverse events were observed in 26 patients (25%). Four of these patients (4%) had serious adverse events that were considered to be related to vismodegib, including one case each of: blocked bile flow from the liver (cholestasis), dehydration with loss of consciousness (syncope), pneumonia accompanied by an inability of the heart to pump enough blood (cardiac failure) and a sudden arterial blockage in the lung (pulmonary embolism). Fatal events were reported in seven patients (7%); none were considered by investigators to be related to vismodegib. In all fatalities, pre-existing risk factors and comorbid conditions were present.

The filing timeline for a European regulatory submission seeking to commercialize the drug in Europe is dependent on planned discussions with the European Medicines Agency, or EMA. Assuming that submissions are filed by Roche and accepted by the applicable regulatory agencies, we will be eligible for milestone payments upon EMA acceptance of such submission and EMA approval to commercialize vismodegib in Europe as well as royalties on any future sales of vismodegib.

Genentech is also conducting a separate phase II clinical trial of vismodegib in patients with operable nodular basal cell carcinoma, which is a less severe form of the disease and accounts for a significant percentage of the approximately two million BCCs diagnosed annually in the United States. This study was initiated by Genentech in October 2010 to test vismodegib as a single-agent therapy in approximately 50 patients with operable nodular BCC in a US-based, open label, two-cohort clinical trial. All patients will receive a 150 mg daily oral dose of vismodegib for 12 weeks. The primary outcome measure for the first cohort is the rate of complete histological clearance of target nodular BCC lesions at the time of tumor excision (which may occur up to 12 weeks following initiation of treatment) while the primary outcome measure for the second cohort is the rate of durable complete clearance of target nodular BCC lesions at the time of excision (which may occur up to 36 weeks following initiation of treatment). We expect that data will be available from this trial later this year or early in 2012. We also anticipate that Genentech will provide us with its plans for future development in operable BCC within this timeframe and we look forward to providing further updates on this in the future.

In addition to the BCC clinical trials being conducted directly by Genentech and Roche, vismodegib is also currently being tested in other cancers in trials under collaborative agreements between Genentech and either third-party investigators or the U.S. National Cancer Institute, or NCI, including in treating BCC in patients with basal cell nevus syndrome (Gorlin syndrome), medulloblastoma, sarcoma and glioblastoma multiforme, as well as in pancreatic, small cell lung, gastroesophageal junction, gastric, breast, and prostate cancers, among others.

Promising interim data from an investigator-sponsored study in basal cell nevus syndrome, or BCNS, was presented in April at the American Association for Cancer Research 2011 annual meeting. This phase II double blind, randomized placebo-controlled, two arm multicenter clinical study of vismodegib enrolled 41 BCNS patients from September 2009 to January 2011. It is designed to assess the safety and efficacy of a 150 mg dose of daily oral vismodegib versus a placebo. A Data Safety Monitoring Board, or DSMB, tasked with reviewing the unblinded results from an interim analysis of 29 patients who completed an average of six months of drug treatment, subsequently recommended to end the placebo arm of the trial due to statistically significant differences between the two groups, in order for all of the patients enrolled in the trial to receive vismodegib treatment. The DSMB's analysis revealed that vismodegib reduced the rate of new BCCs from an average of 1.74 BCCs per month in the placebo group to 0.07 in the vismodegib group (p<0.0001). Vismodegib also reduced the size of existing BCCs (-24 cm vs. 3 cm placebo, cumulative diameter, p=0.006). Some patients achieved near complete remission with no BCC developing resistance during this period of time on trial. Observations related to vismodegib's safety were similar to what has been reported in previous clinical studies, including grade 1-2 taste loss, muscle cramps, hair loss and weight loss when compared to placebo were common. There were two grade 3-4 adverse events observed, including one grade 3 muscle cramp and one grade 4 depression. Overall, 28% of patients taking vismodegib discontinued participation due to adverse events.


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Network-Targeted Cancer Programs

Our internal drug development efforts are focused on our network-targeted cancer programs, in which we are seeking to design single novel small molecule drug candidates that inhibit multiple signaling pathways that are believed to play roles in cancer cell proliferation. We refer to this approach as cancer network disruption. We believe that our approach of targeting multiple nodes in cancer signaling pathway networks may provide a better therapeutic effect than many of the cancer drugs currently marketed or in development since our drug candidates are being designed to disrupt multiple targets in the cancer network environment as compared to most other cancer drugs which are designed to disrupt only one target.

CUDC-101. Our lead candidate from these programs is CUDC-101, a first-in-class small molecule compound designed to simultaneously target histone deacetylase, or HDAC, epidermal growth factor receptor, or EGFR, and human epidermal growth factor receptor 2, or Her2, all of which are validated cancer targets. A significant amount of our capital resources are focused on the ongoing clinical development of this molecule. To date, we have completed a phase I dose escalation clinical trial of CUDC-101 in 25 patients with advanced, refractory solid tumors and we have completed enrollment in a phase I expansion trial to test CUDC-101 in 46 patients with specific tumor types, including breast, gastric, head and neck, liver and non-small cell lung cancers. The phase I expansion trial is designed as an open-label study in which patients are treated with CUDC-101 at the maximum tolerated dose, which was determined in the phase I dose escalation study to be 275 milligrams per meter2. The primary objectives of this study are to compare the safety and tolerability of CUDC-101 in subjects with these specific advanced solid tumors when the drug is administered via one-hour intravenous infusion either on a five days per week schedule (one week on/one week off) or on a three days per week schedule (three weeks on/one week off).

The safety profile observed to-date for both dosing schedules appears to be consistent with that observed in the phase I dose escalation study. In addition, we have observed stable disease in several patients in this study. Most notably, we have observed stable disease in four patients with advanced liver cancer. Two patients have been treated with CUDC-101 for over six months, one of which remained on study for nearly one year of treatment, while two additional patients achieved stable disease for approximately four months prior to disease progression.

During the second quarter of 2011, we initiated a phase I clinical trial of CUDC-101 in advanced head and neck cancer patients whose cancer is human papilloma virus, or HPV, negative, and in August 2011 we treated the first patient in this study. The primary objective of this study is to evaluate the safety and tolerability of CUDC-101 when administered in combination with the current standard-of-care of cisplatin, a chemotherapeutic drug, and radiation. Upon determination of the maximum tolerated dose and assuming the otherwise successful completion of the phase I trial, we intend to conduct a randomized phase II two-arm clinical trial in which head and neck cancer patients will receive cisplatin and radiation plus or minus CUDC-101. The phase II study would seek to evaluate whether the addition of CUDC-101 can improve the efficacy and durability of cisplatin and radiation therapy in this patient population.

We are also working on an oral formulation of CUDC-101, which we believe has the potential to make CUDC-101 more competitive in certain cancers such as non-small cell lung cancer where patients are generally on therapy for several months and there are competing commercially available molecules that are orally administered. Pending the successful completion of ongoing formulation and preclinical development work, we intend to begin a phase I study of an oral formulation of CUDC-101 during the first half of 2012.

CUDC-907. In January 2011, we selected development candidate CUDC-907, an orally bioavailable, network-targeted small molecule that is designed to inhibit HDAC and phosphatidylinositol-3-kinase, or PI3K. Our scientists are developing CUDC-907 based on published and internally generated data demonstrating that HDAC and PI3K inhibitors have synergistic interaction against cancer cells. We believe that this synergistic mechanism of cancer signaling network disruption, which demonstrated efficacy and a favorable safety profile in a number of preclinical xenograft models, could translate into clinical advantages over single agents. Pending the successful completion of ongoing formulation and preclinical development work, we expect to file an investigational new drug application, or IND, with the FDA to test an oral formulation of CUDC-907 during the first half of 2012.

In addition to our development-stage programs, we continue to progress additional proprietary preclinical research programs and expect that we will select additional small molecule inhibitors from our preclinical portfolio in the future.

Hsp90 Program

Debio 0932. Our heat shock protein 90, or Hsp90, program is being developed by Debiopharm, a Swiss pharmaceutical development company, under an August 2009 license agreement between Curis and Debiopharm. The lead molecule under this license collaboration was designated Debio 0932 by Debiopharm. In April 2010, Debiopharm treated the first patient in a phase I clinical trial to evaluate the safety of Debio 0932 in patients suffering from advanced solid tumors. Debiopharm is finalizing this phase I dose escalation study and has indicated that it intends to initiate a phase Ib expansion study in particular tumor types in early 2012.


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Liquidity

Since our inception, we have funded our operations primarily through license fees, contingent cash payments, research and development funding from our corporate collaborators, the private and public placement of our equity securities, debt financings and the monetization of certain royalty rights. We have never been profitable and have an accumulated deficit of $738,150,000 as of September 30, 2011. We expect to incur significant operating losses for the next several years as we devote substantially all of our resources to our research and development programs. We will need to generate significant revenues to achieve profitability and do not expect to achieve profitability in the foreseeable future, if at all. We believe that near term key drivers to our success will include:

Genentech's receipt of FDA approval to commercialize vismodegib in advanced BCC as well as its ability to successfully launch and commercialize vismodegib in the US market;

Roche's ability to make regulatory submissions to the EMA seeking the approval to commercialize vismodegib in advanced BCC in Europe and to have such filing approved by the EMA;

Debiopharm's ability to advance Debio 0932 into later stages of clinical development;

our ability to successfully plan, finance and complete clinical trials for CUDC-101 and advance CUDC-101 into later stages of clinical development in indications other than head and neck cancers;

our ability to successfully advance early-stage development candidates, such as CUDC-907;

our ability to successfully enter into one or more material licenses or collaboration agreements for our proprietary drug candidates; and

our ability to advance the research of other small molecule cancer drug candidates that we are developing under our proprietary pipeline of network-targeted cancer programs.

Collaboration Agreements

We are currently a party to a June 2003 collaboration with Genentech relating to our Hedgehog pathway inhibitor technologies, and an August 2009 license agreement with Debiopharm relating to our Hsp90 inhibitor technology. Our past and current collaborations have generally provided for research, development and commercialization programs to be wholly or majority-funded by our collaborators and provide us with the opportunity to receive additional contingent cash payments if specified development and regulatory approval objectives are achieved, as well as royalty payments upon the successful commercialization of any products based upon the collaborations. We are currently not receiving any research funding and we do not expect to receive such funding in the future from Genentech or Debiopharm under our current agreements with these parties. We currently expect to incur only nominal research and development costs under our collaborations with Genentech related to the maintenance of licenses. In addition, as a result of our licensing agreements with various universities, we are obligated to make payments to these university licensors when we receive certain payments from Genentech. As of September 30, 2011, we have paid an aggregate of approximately $940,000 related to ongoing agreements, of which $900,000 relates to payments that we received from Genentech. Assuming we receive the $8,000,000 milestone from Genentech upon FDA acceptance of the vismodegib NDA, we will be obligated to pay $400,000 to these licensors. We also expect to incur general and administrative costs associated with our share of intellectual property costs under our June 2003 collaboration with Genentech. We do not expect to incur any material costs related to our Hsp90 technologies under development by Debiopharm under our August 2009 license agreement with Debiopharm.

Financial Operations Overview

General. Our future operating results will largely depend on the magnitude of payments from our current and potential future corporate collaborators and the progress of drug candidates currently in our research and development pipeline. The results of our operations will vary significantly from year to year and quarter to quarter and depend on, among other factors, the timing of our entry into new collaborations, if any, the timing of the receipt of payments, if any, from new or existing collaborators and the cost and outcome of any preclinical development or clinical trials then being conducted. We anticipate that existing capital resources as of September 30, 2011 should enable us to maintain current and planned operations into the fourth quarter of 2012. Our ability to continue funding our planned operations into and beyond the fourth quarter of 2012 is dependent on future contingent payments that we may receive from Debiopharm or Genentech upon the achievement of development and regulatory approval objectives, our ability to manage our expenses and our ability to raise additional funds through additional corporate collaborations, equity or debt financings, or from other sources of financing.


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A discussion of certain risks and uncertainties that could affect our liquidity, capital requirements and ability to raise additional funds is set forth under "Part II, Item 1A-Risk Factors."

Revenues. We do not expect to generate any revenues from our direct sale of products for several years, if ever. Substantially all of our revenues to date have been derived from license fees, research and development payments, and other amounts that we have received from our strategic collaborators and licensees.

We currently receive no research funding for our programs under our collaborations with Genentech and Debiopharm and we do not expect to receive such funding in the future under these collaborations. Accordingly, our only source of revenues and/or cash flows from operations for the foreseeable future will be up-front license payments and funded research and development that we may receive under new collaboration agreements, if any, contingent cash payments for the achievement of clinical development and regulatory objectives, if any are met, under new collaborations or our existing collaborations with Genentech and Debiopharm, and royalty payments that are contingent upon the successful commercialization of any products based upon these collaborations.

Our ability to enter into new collaborations and our receipt of additional payments under our existing collaborations with Genentech and Debiopharm cannot be assured, nor can we predict the timing of any such arrangements or payments, as the case may be.

Research and Development. Research and development expense consists of costs incurred to discover, research and develop our drug candidates. These expenses consist primarily of: (1) salaries and related expenses for personnel including stock-based compensation expense; (2) outside service costs including clinical research organizations, medicinal chemistry and sublicense payments; and (3) the costs of supplies and reagents, consulting, and occupancy and depreciation charges. We expense research and development costs as incurred. We are currently incurring only nominal research and development expenses under our Hedgehog pathway inhibitor collaboration with Genentech related to the maintenance of third-party licenses to certain background technologies. For each contingent payment, if any, received under the Hedgehog pathway inhibitor collaboration, we would be obligated to make payments to certain third-party licensors and recognize the related expense.

Our research and development programs, both internal and under collaboration, are summarized in the following table:

Product Candidate       Primary Disease      Collaborator/Licensee     Status
Hedgehog Pathway
Inhibitor
-  Vismodegib           Advanced BCC         Genentech                 NDA submitted
(GDC-0449; RG3616)

-  Vismodegib           Operable Nodular     Genentech                 Phase II
(GDC-0449; RG3616)      BCC

Network-targeted
Cancer Programs
-  CUDC-101             Cancer               Internal development      Phase I expansion
intravenous
formulation (HDAC,
EGFR, Her2
inhibitor)
-  CUDC-101             Advanced head        Internal development      Phase I
intravenous             and neck cancer
formulation (HDAC,
EGFR, Her2
inhibitor)
-  CUDC-101 oral        Cancer               Internal development      Development candidate
formulation (HDAC,
EGFR, Her2
inhibitor)
-  CUDC-907 (HDAC,      Cancer               Internal development      Development candidate
PI3K inhibitor)
-  Other                Cancer               Internal development      Preclinical
network-targeted
cancer programs
-  Debio 0932           Cancer               Debiopharm                Phase I
(formerly CUDC-305)
(Hsp90 inhibitor)

In the chart above, "NDA submitted" means that Genentech filed an NDA with the FDA in September 2011 and, pending planned discussions with the EMA, will submit a regulatory filing seeking approval of vismodegib in advanced BCC in Europe. "Phase II" means that Genentech is currently treating human patients in a phase II clinical trial, the primary objective of which is a therapeutic response in the patient population. "Phase I expansion" means that we are currently treating human patients with specific tumor types in an extension of our phase I dose escalation trial, at the maximum tolerated dose from such trial, the principal purpose of which is to evaluate the safety and tolerability of the compound being


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tested. "Phase I" means that we (CUDC-101) and Debiopharm (Debio 0932) are currently treating human patients in separate phase I clinical trials, the principal purpose of which is to evaluate the safety and tolerability of the compound being tested. "Development candidate" means that from our testing in several preclinical models of human disease of various compounds from a particular compound class, we have selected a single lead candidate for potential future clinical development and are seeking to complete the relevant safety, toxicology, and other data required to submit an IND application with the FDA seeking to commence a phase I clinical trial. "Preclinical" means that we are seeking to obtain evidence of therapeutic efficacy and safety in preclinical models of human disease of one or more compounds within a particular class of drug candidates.

Because of the early stages of development of these programs, our ability and that of our collaborators and licensees to successfully complete preclinical studies and clinical trials of these drug candidates, and the timing of completion of such programs, is highly uncertain. There are numerous risks and uncertainties associated with developing drugs which may affect our and our collaborators' future results, including:

the scope, quality of data, rate of progress and cost of clinical trials . . .

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