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CRIS > SEC Filings for CRIS > Form 10-Q on 12-Nov-2013All Recent SEC Filings

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Form 10-Q for CURIS INC


12-Nov-2013

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. Some of the information contained in this discussion and analysis and set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the section titled "Risk Factors" in Part II, Item 1A of this report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. As used throughout this report, the terms "the Company," "we," "us," and "our" refer to the business of Curis, Inc. and its wholly owned subsidiaries, except where the context otherwise requires, and the term "Curis" refers to Curis, Inc.

Overview

We are an oncology-focused drug development company seeking to develop novel, targeted drug candidates for the treatment of human cancers. We conduct our research and development programs both internally and through strategic collaborations. Erivedge® is the first and only approved medicine for the treatment of advanced basal cell carcinoma, or BCC, and is being commercialized by F. Hoffmann-La Roche Ltd, or Roche, and Genentech Inc., or Genentech, a member of the Roche Group, under a collaboration agreement between Curis and Genentech. We are also leveraging our experience in targeting signaling pathways in seeking to develop targeted drug candidates including CUDC-427, a small molecule antagonist of the inhibitor of apoptosis, or IAP, proteins, and CUDC-907, a dual phosphoinostide-3 kinase, or PI3K, and histone deacetylase, or HDAC, inhibitor. Our licensee Debiopharm is advancing the clinical development of the heat shock protein 90, or HSP90, inhibitor, Debio 0932.

We initiated a phase 1 study of CUDC-427 in July 2013. On November 5, 2013, we received written notification from the United States Food and Drug Administration, or FDA that our Phase 1 study of CUDC-427 has been placed on partial clinical hold following the report of death of a patient who progressed to liver failure approximately one month following the discontinuation of CUDC-427 dosing. Under this partial clinical hold, new patients may not be enrolled in the study until we provide the FDA with requested additional data and analysis on patients treated with CUDC-427 and a proposed protocol amendment is submitted to and accepted by the FDA. We expect to respond to the FDA's requests for additional information and also plan to submit an amendment to the current protocol in a timely manner.

Erivedge®

Erivedge® (vismodegib) capsule. Erivedge is a first-in-class orally-administered small molecule Hedgehog pathway inhibitor developed under collaboration with Genentech. Erivedge was discovered by Genentech and jointly validated by Genentech and Curis through a series of preclinical studies. Pursuant to this collaboration, Genentech and Roche are responsible for clinical development, and Genentech (in the U.S.), Roche (outside the U.S., excluding Japan) and Chugai (in Japan) are responsible for commercialization of Erivedge. We are eligible to receive cash payments upon the successful achievement of specified clinical development and regulatory approval milestones, as well as royalties related to commercial sales of Erivedge.

In January 2012, based on the results of the phase 2 pivotal ERIVANCE BCC clinical study, the U.S. Food and Drug Administration, or FDA, approved Erivedge for treatment of adults with BCC that has spread to other parts of the body or that has come back after surgery or that their healthcare provider decides cannot be treated with surgery or radiation. We refer to this indication as advanced BCC. The ERIVANCE BCC study enrolled 104 advanced BCC patients (71 had locally advanced and 33 had metastatic disease) from 31 study centers in the US, Australia and Europe. The study showed that Erivedge substantially shrank tumors or healed visible lesions, as defined by objective response rate, in 42.9 percent of patients with locally advanced and 30.3 percent of patients with metastatic BCC as assessed by independent review. The most common adverse events included muscle spasms, hair loss, altered taste sensation, fatigue and weight loss. Serious adverse events (SAEs) were observed in 26 patients (25 percent), however of these only four patients (4 percent) had SAEs that were considered to be related to treatment with Erivedge. Fatal events were reported in seven patients (7 percent) although none were considered by investigators to be related to treatment with Erivedge. In all seven cases, patients had other pre-existing diseases or symptoms that were related to their presumed cause of death.

In May 2013, Australia's Therapeutic Goods Administration, or TGA, approved Erivedge, resulting in a $4,000,000 milestone payment to us. In July 2013, the European Commission granted conditional approval for the marketing of Erivedge in all 28 European Union member states. This conditional approval makes Erivedge the first licensed treatment in


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Europe for advanced BCC and also resulted in a $6,000,000 milestone payment to us from Genentech. A conditional marketing authorization is granted to medicinal products with a positive benefit/risk assessment that satisfy an unmet medical need and whose availability results in a significant public health benefit. Under the provisions of the conditional approval, Roche is expected to provide additional data on Erivedge in advanced BCC from the ongoing global safety study, known as STEVIE, which is an international, single-arm, open-label multicenter trial in patients with advanced forms of BCC. An interim analysis from STEVIE presented at the American Society of Clinical Oncology's, or ASCO, 2013 Annual Conference confirmed a similar safety profile to that observed in the ERIVANCE BCC study.

In addition to the United States, Australia and European Union, Erivedge is approved in several other countries and Roche has also filed several new drug applications for marketing registration with health agencies in other territories. Erivedge's regulatory approvals and Roche's submissions in other territories are based on positive clinical data from the ERIVANCE BCC study.

In addition to the lead indication of advanced BCC, Genentech evaluated Erivedge in a single-arm, three cohort phase 2 clinical trial to treat less advanced forms of BCC. Roche expects to present data from this study at a medical meeting during the first quarter of 2014. Roche has also initiated a randomized, placebo controlled phase 2 study to investigate the efficacy of 12 weeks of Erivedge treatment (versus placebo) prior to surgery in previously untreated BCC. The primary endpoint of this study is the percentage change in BCC tumor area following 12 weeks of Erivedge or placebo therapy.

Outside of BCC, in October 2013 Roche also initiated a phase 1b/2 clinical trial to investigate the safety and efficacy of Erivedge in patients with relapsed/refractory acute myelogenous leukemia, or AML, and relapsed/refractory high-risk myelodysplastic syndrome, or MDS. In contrast to BCC, these two clinical conditions are driven by mechanisms that are not linked to mutations in the Hedgehog pathway. It is believed that selective targeting and blocking of the Hedgehog signaling pathway may have an effect on leukemic (stem) cell proliferation and survival.

According to Roche, the open-label, non-randomized study is expected to enroll approximately 60 patients into two cohorts. Patients in Cohort 1 will receive 150 milligrams of Erivedge alone once daily, and patients in Cohort 2 will receive the same dose of Erivedge once daily in combination with the standard dose of cytarabine administered for 10 days. The primary endpoint of the trial is the overall response rate after 8 weeks of treatment. The secondary endpoints include overall response rate at any time during treatment, duration of response, overall survival, and safety and pharmacokinetics of the study drug(s).

In addition to Genentech/ Roche sponsored studies, several third-party investigators are also conducting clinical trials with Erivedge in BCC as well as in various other cancers.

Pursuant to the terms of our collaboration agreement with Genentech, we are entitled to a royalty on net sales of Erivedge that ranges from 5% to high single digits of global Erivedge sales, and which escalates within this range with increasing product sales. The royalty rate applicable to Erivedge may be decreased to a low-to-mid single digit royalty in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by the applicable regulatory authority and is being sold in such country by a third party for use in the same indication as Erivedge or when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded.

In December 2012, our wholly-owned subsidiary, Curis Royalty, received a $30,000,000 loan at an annual interest rate of 12.25% pursuant to a credit agreement with BioPharma Secured Debt Fund II Sub, S.à r.l., a Luxembourg limited liability company managed by Pharmakon Advisors, or BioPharma-II. In connection with the loan, we transferred to Curis Royalty our right to receive certain future royalty and royalty-related payments on the commercial sales of Erivedge that we may receive from Genentech. The loan and accrued interest will be repaid by Curis Royalty using such royalty and royalty-related payments. To secure repayment of the loan, Curis Royalty granted a first priority lien and security interest (subject only to permitted liens) to BioPharma-II in all of its assets and all real, intangible and personal property, including all of its right, title and interest in and to the royalty and royalty-related payments. The loan constitutes an obligation of Curis Royalty, and is intended to be non-recourse to us. Under the terms of the loan, quarterly royalty payments received by Curis Royalty from Genentech will first be applied to pay (i) escrow fees payable by us pursuant to an escrow agreement between Curis, Curis Royalty, BioPharma-II and Boston Private Bank and Trust Company, (ii) our royalty obligations to academic institutions, (iii) certain expenses incurred by BioPharma-II in connection with the credit agreement and related transaction documents, including enforcement of its rights in the case of an event of default under the credit agreement and (iv) expenses incurred by us enforcing our right to indemnification under the collaboration agreement with Genentech. Remaining amounts, subject to caps of $1,000,000 per quarter in 2013, $2,000,000 per quarter in 2014 and $3,000,000 per quarter in 2015, will be applied first, to pay interest and second, principal on the loan. Curis Royalty will be entitled to receive the remaining amounts above the caps, if any, and we remain entitled to receive any contingent payments upon achievement of clinical development objectives. Curis Royalty retains the right to royalty payments related to sales of Erivedge following repayment of the loan.


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The final maturity date of the loan will be the earlier of the date when the principal is paid in full and the termination of Curis Royalty's right to receive royalties under the collaboration agreement with Genentech. At any time after January 1, 2017, Curis Royalty may, subject to certain limitations, prepay the outstanding principal of the loan in whole or in part, at a price equal to 105% of the outstanding principal on the loan, plus accrued but unpaid interest. The obligations of Curis Royalty under the credit agreement to repay the loan may be accelerated upon the occurrence of an event of default as defined in the credit agreement. During 2013, Curis Royalty began making payments to BioPharma-II upon receipt of the Erivedge royalties. The amounts paid through September 30, 2013 were less than the interest accrued through the repayment dates resulting in a total of $754,000 being added to the outstanding principal. As of September 30, 2013, Curis Royalty owed a total of $31,068,000, gross, to BioPharma-II comprised of principal and accrued interest.

We recognized $2,550,000 of royalty revenue from Genentech's net sales of Erivedge during the nine months ended September 30, 2013 and an aggregate of $4,080,000 in royalty revenues since Erivedge was approved. As indicated above, we expect that some or all of such royalty revenues will be used to pay interest under the loan that Curis Royalty received from BioPharma-II, subject to quarterly caps.

We are also obligated to make payments to university licensors on royalties that Curis Royalty earns in all territories other than Australia in an amount that is equal to 5% of the royalty payments that Curis Royalty receives from Genentech for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012. For royalties that Curis Royalty earns from Roche's potential future sales of Erivedge in Australia, we will be obligated to make payments to university licensors in an amount that is equal to 2% of Roche's direct net sales in Australia until April 2019, after which the amount will decrease to 5% of the royalty payments that Curis Royalty receives from Genentech for the remainder of the period ending 10 years from the first commercial sale of Erivedge, or February 2022. We recorded cost of royalty revenues of $127,000 and $304,000, respectively, during the nine months ended September 30, 2013 and 2012, respectively.

Targeted Cancer Drug Candidates

CUDC-427. In November 2012, we licensed from Genentech the exclusive, worldwide rights for the manufacture, development and commercialization of a small molecule Smac mimetic drug candidate, CUDC-427, that is designed to promote cancer cell death by antagonizing inhibitor of apoptosis, or IAP, proteins. Under the terms of the license agreement, we have the sole right and responsibility for all research, development, manufacturing and commercialization activities related to CUDC-427. Genentech will be entitled to milestone payments upon the first commercial sale of CUDC-427 in certain territories and a tiered low-to-mid single-digit royalty on net sales of CUDC-427, if any.

IAP proteins are a family of functionally and structurally related proteins that promote cancer cell survival by inhibiting programmed cell death, a process also referred to as apoptosis. Using IAP proteins and other anti-apoptotic factors, cancer cells evade cell death in response to a variety of signals, including those provided by anti-cancer agents such as chemotherapy, or naturally occurring inflammatory and immune signals transmitted through members of the tumor necrosis factor, or TNF family. Evasion from apoptosis is a fundamental mechanism whereby human cancers develop resistance to standard anti-cancer treatments. IAP inhibitors such as CUDC-427 are designed to counteract the effects of IAP proteins, thus shifting the balance away from cancer cell survival and allowing apoptosis to proceed.

We initiated a phase 1 study of CUDC-427 in July 2013. On November 5, 2013, we received written notification from the United States Food and Drug Administration (FDA) that our Phase 1 study of CUDC-427 has been placed on partial clinical hold following the report of death of a patient who progressed to liver failure approximately one month following the discontinuation of CUDC-427 dosing. Under this partial clinical hold, new patients may not be enrolled in the study until we provide the FDA with requested additional data and analysis on patients treated with CUDC-427 and a proposed protocol amendment is submitted to and accepted by the FDA. We expect to respond to the FDA's requests for additional information and also plan to submit an amendment to the current protocol in a timely manner.

A clinical hold is an order issued by FDA to the sponsor of an IND to delay or to suspend a clinical investigation. A clinical hold, including a partial clinical hold, involves the FDA (1) requiring additional information and/or data, (2) reviewing the additional information and/or data, and (3) after the review, informing the sponsor that they can proceed. A partial clinical hold is defined as a delay or suspension of only part of the clinical work requested under the IND (e.g., a specific protocol or part of a protocol is not allowed to proceed; however, other protocols or parts of the protocol are allowed to proceed under the IND).


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The study was designed to determine the maximum tolerated dose (MTD) and recommended single-agent Phase 2 dose of CUDC-427 using a continuous, twice-daily treatment schedule. One patient with breast cancer metastatic to the liver, lungs, bone and ovaries developed serious adverse events related to liver function, including increases in serum levels of AST and ALT enzymes and bilirubin. Unlike prior clinical experience with CUDC-427, this patient's liver enzyme levels did not recover in response to CUDC-427 discontinuation, and the patient died of liver failure approximately one month following the discontinuation of CUDC-427 dosing. While elevations in liver enzyme levels have previously occurred in patients receiving CUDC-427, no other patients in this or a prior Phase 1 CUDC-427 trial have experienced a serious adverse event of this nature. There are no patients currently being treated with CUDC-427 in this study as all other patients enrolled in this study have discontinued dosing due to disease progression or patient or physician discretion during the ordinary course of the study.

We licensed CUDC-427 from Genentech, which completed enrollment in a phase 1 clinical trial of CUDC-427 (previously GDC-0917), in which 42 patients with refractory solid tumors or lymphoma received daily oral doses of CUDC-427 for two weeks, followed by a one week rest period until disease progression or study discontinuation for any other reason. Results of this phase 1 study were presented during an oral session at the ASCO 2013 Annual Conference in June 2013. In this study, patients were enrolled across 11 cohorts and received CUDC-427 monotherapy at doses ranging from 5 mg to 600 mg daily. Unconfirmed complete responses were reported in 2 patients, including one patient with ovarian cancer and another with mucosa-associated lymphoid tissue (MALT) lymphoma. Additionally, one patient experienced a mixed response and four patients (one patient each with breast cancer, sarcoma, small cell lung cancer and Kaposi's sarcoma) had stable disease for greater than or equal to three months, including a patient on study for greater than 10 months. The maximum tolerated dose, or MTD, of CUDC-427 was not determined in this study, although plasma concentrations in the order of preclinically predicted ED90 were reached. ED90 refers to the dose that leads to 90% of the maximal response. There were three deaths reported during the study, none of which was considered related to the study drug: two died due to progression of breast cancer and one patient died due to pneumonia. Adverse events (AEs) that resulted in treatment discontinuation were Grade 3 fatigue (one patient), Grade 2 QTc prolongation (one patient), Grade 2 drug hypersensitivity (one patient), Grade 2 pneumonitis (one patient), and Grade 3 pruritus/Grade 2 rash (one patient). Other treatment related AEs that were equal to or greater than Grade 3 in severity in more than one patient were elevated levels of liver enzymes (two patients at 450 and 600 mg dose). Biomarker analyses of tumor samples (obtained from two patients) and peripheral blood cells (obtained from all patients) showed changes that were consistent with CUDC-427's mechanism of action.

CUDC-907. CUDC-907 is an orally bioavailable drug candidate designed to predominantly inhibit certain isoforms of phosphoinositide-3-kinase, or PI3K (mainly PI3K- alpha, delta and beta) and select classes of histone deacetylase, or HDAC enzymes (primarily Classes I and IIB). In January 2013, we initiated a phase 1 clinical trial in patients with advanced lymphoma or multiple myeloma. This first-in-human study is designed to assess the safety (including the MTD), pharmacokinetics, and anti-cancer activity of CUDC-907. In July 2013, we amended the protocol of the ongoing phase 1 study to include two additional dosing regimens, wherein oral CUDC-907 will be administered either two times per week or three times per week. Additionally, exploratory biomarkers will be assessed for the activity of CUDC-907.

In November 2011, we entered into an agreement with The Leukemia & Lymphoma Society, or LLS, under which LLS agreed to make up to $4,000,000 in milestone payments to support our ongoing development of CUDC-907 for patients with relapsed or refractory lymphoma, contingent upon the Company's achievement of specified clinical objectives. As of September 30, 2013, we have earned $1,650,000 in milestone payments under our agreement with LLS. Under certain conditions associated with the successful partnering and/or commercialization of CUDC-907 in the specified indications, we may be obligated to make payments, including royalties, to LLS up to a maximum of $10,000,000. This obligation is limited to 2.5 times the amount we receive from LLS, and, as of September 30, 2013, the maximum obligation, assuming that CUDC-907 successfully progresses through future clinical trials, would be $4,125,000. Our scientists are also conducting ongoing preclinical studies of CUDC-907 in solid tumor cancers and we are currently planning a phase 1 study in patients with solid tumors.

Debio 0932. In August 2009, we granted a worldwide, exclusive royalty-bearing license to develop, manufacture, market and sell our HSP90 inhibitor technology, including Debio 0932, to Debiopharm. Debiopharm has assumed all future development responsibility for Debio 0932 and Debiopharm or a Debiopharm licensee will incur all future costs related to the development, registration and commercialization of products under the agreement.

In April 2010, Debiopharm initiated a phase 1 clinical trial to evaluate the safety of Debio 0932 given orally to patients with advanced solid tumors. In 2011, Debiopharm successfully advanced Debio 0932 through the dose escalation portion of this phase 1 study and determined 1000 mg daily to be the recommended dose for further development. In the beginning of 2012, Debiopharm advanced Debio 0932 into the phase 1b expansion portion of the study at this 1000 mg daily dose level. The primary objectives of this study were to further assess the safety profile, pharmacokinetics and pharmacodynamics of Debio 0932 at the oral 1000 mg daily dose and to make a preliminary assessment of its anti-tumor activity. Debiopharm completed the phase 1b expansion portion of the study, enrolling approximately 30 patients with advanced solid tumors, including patients with non-small cell lung cancer, or NSCLC.


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In August 2012, Debiopharm initiated the HALO (HSP90 inhibition And Lung cancer Outcomes) phase 1/2 clinical trial of Debio 0932 in combination with various chemotherapy regimens in patients with stage IIIb or IV NSCLC without known EGFR mutations. In the phase 1 portion of this study, various doses of Debio 0932 are being investigated in combination with either cisplatin/pemetrexed or cisplatin/gemcitabine in treatment-naïve patients, and with docetaxel in previously treated patients. Once a recommended phase 2 dose of Debio 0932 in combination with the chemotherapy regimen(s) has been identified, Debiopharm expects to initiate the randomized, double-blind, placebo-controlled phase 2 portion of the study. The phase 2 portion of the HALO trial is expected to enroll approximately 140 eligible patients with NSCLC, who will be randomized to receive standard of care chemotherapy treatment in combination with either Debio 0932 or placebo. The primary objective of this study is to compare the effect of adding Debio 0932 to combination chemotherapy with cisplatin/pemetrexed and cisplatin/ gemcitabine on the rate of progression-free survival at 6 months in first-line therapy of patients in this study population. Under our agreement with Debiopharm, we are eligible for our next milestone payment when Debiopharm treats its fifth patient in a phase 2 clinical trial, which we expect could occur in 2014. We have received $13,000,000 in milestone payments to-date from Debiopharm under this collaboration.

In October 2013, Debiopharm initiated an open-label, multicenter phase 1 dose-finding study of Debio 0932, in combination with everolimus, an inhibitor of mammalian target of rapamycin (mTOR), in patients with advanced or metastatic renal cell carcinoma, or RCC, who have been previously treated with a VEGF-directed tyrosine kinase inhibitor. This dose escalation study is designed to determine the safety and maximum tolerated dose of Debio 0932.

The pharmacokinetic profiles and any potential drug-drug interactions between the two agents will also be assessed. The trial also includes an expansion cohort of 25 patients with metastatic clear cell RCC. While approved monotherapy treatments for RCC, including mTOR inhibitors, have been shown to be effective in RCC, improved therapies are needed to enhance the depth and duration of response. Several mTOR signaling pathway components such as mTOR, AKT and LKB1 are HSP90 client proteins. Mechanistic data suggest the potential for improved efficacy through dual mTOR and HSP90 inhibition, which may also prevent the development of acquired resistance to this cancer therapy.

CUDC-101/EGFR Preclinical Program. CUDC-101 is a drug candidate that is designed to target epidermal growth factor receptor, or EGFR, human epidermal growth factor receptor 2, or HER2, and certain HDAC enzymes. In October 2012, we initiated a phase 1 clinical trial of an oral formulation of CUDC-101 in cancer patients. We subsequently terminated this study as the bioavailability observed in the first cohort of patients was too low to achieve effective drug levels with this formulation. We are currently pursuing the development of alternative formulations that may provide improved oral bioavailability and allow us to progress CUDC-101 towards clinical testing and expect that we will have sufficient data to determine whether to advance CUDC-101 into clinical development in the coming months.

We initially developed CUDC-101 as an intravenous formulation and we completed two clinical trials with this formulation, including a phase 1 dose escalation clinical trial of CUDC-101 in 25 patients with advanced, refractory solid tumors and a phase 1 expansion trial that tested CUDC-101 in 46 patients with specific tumor types, including breast, gastric, head and neck, NSCLC or liver cancers. In 2011, we began testing an intravenous formulation of CUDC-101 in a phase 1 clinical trial in patients with locally advanced squamous cell carcinoma of the head and neck in combination with the current standard-of-care of cisplatin and radiation. In April 2013, we determined that we would discontinue enrolling patients in this study and that the future development of CUDC-101 would be dependent on our ability to successfully develop an oral formulation of CUDC-101. Our decision was based largely on the difficulty in enrolling patients in this trial as well as our desire to direct our available financial resources to the development of CUDC-427 and CUDC-907.

In addition to CUDC-101, we are exploring additional preclinical compounds that are designed to target specific aspects of the EGFR receptor.

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 . . .

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