Corbus Pharmaceuticals (CRBP 4.00%) expects 2020 to be a banner year, led by results from its pivotal phase 3 clinical trial for lead drug lenabasum. Results from two additional phase 2 trials with lenabasum should also be reported. Additionally, Corbus plans to build its sales, marketing, and reimbursement teams in anticipation of lenabasum's future approval and the company's first commercial product launch.
What should investors think about this biotech stock?
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Pivotal trial results expected next summer
Corbus plans to announce the first data from its pivotal phase 3 trial comparing lenabasum to placebo in systemic sclerosis, an autoimmune disease affecting skin and connective tissues. The primary endpoint of the trial will be the change from baseline to the end of the trial in the ACR Composite Response Index in Systemic Sclerosis (CRISS), a compilation of five assessments evaluating different aspects of the disease.
Why is this important? After meeting with the U.S. Food and Drug Administration (FDA), Corbus switched the primary endpoint in April 2019 to ACR CRISS from the original modified Rodnan Skin Score (mRSS). Prior clinical trials for systemic sclerosis used mRSS. Switching an endpoint after a pivotal trial is underway is virtually unheard of and raises the question "why didn't the company have alignment with the FDA prior to starting the trial?"
On the second-quarter conference call, Corbus' chief medical officer said the FDA is "cognizant of the shortcomings" of using different scales and will look at the "totality of the data." To be clear, mRSS is one of the five components of ACR CRISS. Investors should be cautious, as it appears the FDA is not in full agreement as to which endpoints carry more weight than others.
Approximately 200,000 people in the U.S., Europe, and Japan suffer from systemic sclerosis. It is four times more common in women than in men. Corbus believes that lenabasum's potential opportunity to treat these patients could translate into $1.4 billion to $2.2 billion in peak sales.
In addition, results from a phase 2b trial with lenabasum in cystic fibrosis should be available next summer. Affecting about 30,000 people in the U.S., cystic fibrosis is a progressive genetic disease that causes frequent lung infections and can lead to shorter-than-normal lifespans.
Yet another phase 2 trial, this time in lupus erythematosus, should report results in 2020. The National Institutes of Health funded and ran the phase 2 trial in lupus, a disease where the immune system attacks healthy cells across a variety of organs.
Meanwhile, Corbus continues to enroll patients in a pivotal phase 3 trial for a rare muscle disease called dermatomyositis, with results expected in 2021.
Lastly, Corbus expects to initiate the first human clinical trial of its next drug candidate CRB-4001 in 2020. While this is a positive step in expanding the story beyond lenabasum, investors should know that safety and dosing data is likely a year away. It will take even longer to see evidence of efficacy.
Corbus needs more money
Conducting late-stage clinical trials requires substantial amounts of capital. Building out a sales and marketing team to launch lenabasum in 2021 further adds to the expense before FDA approval. Corbus burned through $83.5 million in the first nine months of 2019, or roughly $27 million to $28 million per quarter.
Corbus ended the third quarter just shy of $55 million in cash. The last earnings report claimed it was enough to "fund operations into the third quarter of 2020." The prior quarter's guidance stated the company had enough cash to get to the fourth quarter. Thus, spending is increasing. The burn rate cannot be sustained without a financing or non-dilutive infusion of capital, say from a partnership.
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Kaken Pharmaceuticals paid Corbus $27 million this summer to acquire the Japanese rights to lenabasum. Additional milestone payments could be paid to Corbus upon Kaken's successful achievement of clinical and regulatory goals. The company plans to retain the rights and market lenabasum in both the U.S. and European markets.
Corbus' CEO Yuval Cohen said in the third quarter earnings press release that efforts are underway to develop strategic partnerships for lenabasum in other Asian countries.
That leaves Corbus with CRB-4001 and a pipeline of drug candidates that are still not ready for human trials. While CRB-4001 is about to enter human testing, earlier-stage assets do not typically command the same price as later-stage drugs with available clinical trial data.
Corbus needs to raise money soon. Most biotechs do this by issuing new stock to investors at a discount to the current stock price. Generally, healthcare specialist funds and hedge funds get to participate. The financing terms become uglier for the company and existing shareholders as the company goes below one year of cash. This simply means the new stock is sold at is greater discount to the current price generally causing the stock to drop to that new level.
Investors should hold off for now. Unless a lucrative deal for lenabasum in China materializes, Corbus will raise money in the next few months by issuing new shares. With the financing overhang removed, investors should have ample time to acquire shares before next year's clinical trial results.
