Full Press Release Details
Curis Reports Third Quarter 2005 Results
CAMBRIDGE, MA, November 14, 2005 Curis, Inc. (NASDAQ:CRIS), a therapeutic
drug development company, today reported its financial results for the three and nine-month periods ended September 30, 2005.
For the third quarter of 2005, we reported a net loss of $3,631,000 or ($0.08) per share as compared to a net loss of $3,906,000 or ($0.09) per share for the prior year
Net revenues for the third quarter of 2005 were $1,815,000 as compared
to $1,486,000 for the same period of 2004, an increase of $329,000, or 22%. The increase in net revenues was primarily due to an increase in our gross revenues, offset by contra-revenues recorded under our basal cell carcinoma co-development
arrangement with Genentech (NYSE: DNA). In addition, as further described below, we recorded an adjustment of $460,000 to reduce revenues recorded under our Genentech Hedgehog antagonist and Wyeth Hedgehog agonist collaborations, respectively.
Revenues are summarized by type and collaborator in the following table:
| Three Months Ended September 30, | |||||||
| 2005 | 2004 | ||||||
| Gross revenues: | |||||||
| Genentech | $ | 1,773,000 | $ | 611,000 | |||
| Wyeth | 585,000 | 736,000 | |||||
| Procter & Gamble | 10,000 | ||||||
| Spinal Muscular Atrophy Foundation | 205,000 | 139,000 | |||||
| Other | 62,000 | ||||||
| Subtotal | 2,635,000 | 1,486,000 | |||||
| Contra-revenue: | |||||||
| Genentech co-development contra-revenue | (820,000 | ) | |||||
| Net revenues | $ | 1,815,000 | $ | 1,486,000 |
Gross revenues generated under our
ongoing collaborations with Genentech and Wyeth (NYSE: WYE) and our grant from the Spinal Muscular Atrophy Foundation were $2,563,000 for the third quarter of 2005 as compared to $1,486,000 for the same period in the prior year, an increase of
$1,077,000, or 72%. We also recorded $820,000 in contra-revenues for the third quarter of 2005 related to our equal share of development costs for our basal cell carcinoma product candidate under development with Genentech.
In the quarter ended September 30, 2005, we recorded an adjustment to correct an error in recording the fair value
of shares issued in connection with our collaborations with Genentech and Wyeth. The shares issued in the transactions were valued using contractually-agreed upon trailing averages of closing prices. We have determined that we should have valued the
shares using the quoted market price on the dates of issuance. As a result of the error, additional paid-in capital was understated and deferred revenues were overstated. The effect of these adjustments was to increase additional paid-in capital by
$1,629,000, decrease deferred revenue by $1,169,000 and to reverse $460,000 of license fee revenue to correct for the cumulative overstatement of revenues under these collaborations in the periods from June 2003 through June 30, 2005.
Operating expenses for the third quarter of 2005 were $5,672,000 as compared
to $5,445,000 for the third quarter of 2004, an increase of $227,000, or 4%. The primary changes in our research and development and general and administrative expenses were as follows:
Research and development: Research and development expenses were $3,821,000 for the third quarter of 2005 as compared
to $3,289,000 for the same period in the prior year, an increase of $532,000, or 16%. This increase was primarily attributable to an increase in spending related to our Spinal Muscular Atrophy, or SMA, program. A majority of our SMA program costs
are funded under a grant from the SMA Foundation.
General and administrative: General and administrative expenses were $1,833,000 for the third quarter of 2005 as compared to $2,138,000 for the same period in the prior year, a decrease of $305,000, or 14%. This decrease was
primarily due to decreases in legal, consulting and professional service expenses.
For the nine-month period ended September 30, 2005, we reported a net loss of $13,419,000 or ($0.28) per share as compared to a net loss of $12,245,000 or ($0.30) per share for the same period in the prior year.
Net revenues for the nine-months ended September 30, 2005 were $2,803,000 as compared to
$3,462,000 for the same period of 2004, a decrease of $659,000, or 19%. Revenues are summarized by type and collaborator in the following table:
| Nine Months Ended September 30, | |||||||
| 2005 | 2004 | ||||||
| Gross revenues: | |||||||
| Genentech | $ | 4,835,000 | $ | 1,556,000 | |||
| Wyeth | 2,169,000 | 1,717,000 | |||||
| Procter & Gamble | 10,000 | ||||||
| Spinal Muscular Atrophy Foundation | 1,425,000 | 139,000 | |||||
| Other | 62,000 | 50,000 | |||||
| Subtotal | 8,501,000 | 3,462,000 | |||||
| Contra-revenue: | |||||||
| Genentech co-development contra-revenue | (5,698,000 | ) | |||||
| Net revenues | $ | 2,803,000 | $ | 3,462,000 |
Gross revenues generated under our ongoing collaborations with Genentech and Wyeth and our grant from the SMA Foundation
were $8,429,000 for the nine months ended September 30, 2005 as compared to $3,412,000 for the same period in the prior year, an increase of $5,017,000, or 147%. We recorded $5,698,000 in contra-revenues for the nine months ended
September 30, 2005 related to our equal share of development costs for our basal cell carcinoma product candidate under development with Genentech.
Operating expenses were $16,845,000 and $15,966,000 for the nine-month periods ended September 30, 2005 and 2004, respectively. The significant changes in our
research and development and general and administrative expenses were as follows:
Research and development: Research and development expenses were $10,648,000 for the nine months ended September 30, 2005 as compared to $9,449,000 for the same period in the prior year, an increase of
$1,199,000, or 13%. This increase was primarily attributable to a $1,907,000 increase in spending related to our SMA program, partially offset by a $676,000 decrease in stock-based compensation expense.
General and administrative: General and administrative expenses were
$6,141,000 for the nine months ended September 30, 2005 as compared to $6,461,000 for the same period in the prior year, a decrease of $320,000, or 5%. This decrease was primarily due to decreases in legal, consulting and professional service
expenses, offset by increases in personnel costs and a $500,000 charge recorded during the second quarter of 2005 related to the estimated loss of subtenant income.
As of September 30, 2005, cash, cash equivalents and marketable securities, were $42,898,000. As of September 30, 2005, there were
48,285,788 shares of common stock outstanding.
Contra-Revenue Accounting
As required under accounting rules outlined in Emerging Issues Task Force
No. 01-9, we recorded contra-revenue for amounts that we paid to Genentech during the three- and nine-month periods ending September 30, 2005 and for amounts that we owed to Genentech as of September 30, 2005 that will be paid
subsequent to the end of the quarter for the reimbursement of our equal share of costs incurred by Genentech in connection with the co-development of our basal cell carcinoma product candidate. These contra-revenues offset gross revenues recorded
under our collaborations and research grant. Amounts paid by us to Genentech under the co-development arrangement will be recorded first as contra-revenue to the extent of both cumulative revenue recognized to date and probable future revenues,
which includes any unamortized deferred revenue balances under both of our collaborations with Genentech, and then as expense.
We reiterate our 2005 financial guidance provided as part of our second quarter earnings release except that, as a result of a $1,500,000 payment received on a note receivable from a former collaborator in October
2005 and from lower than expected co-development costs under our basal cell carcinoma co-development arrangement with Genentech, we have updated our year-end cash guidance. Assuming that we receive all contractually defined cash payments from
Genentech, Wyeth and the SMA Foundation, we now expect to end 2005 with cash, cash
equivalents and marketable securities of between $38,000,000 and $41,000,000. We had previously estimated that we would end the year with between $36,000,000
Third Quarter 2005 Highlights
Daniel Passeri, Curis President and Chief Executive
Officer, stated, This past quarter we continued to implement our business strategy of collaborating with major pharmaceutical and biotechnology companies and structuring those relationships to include the potential for co-development, so that
Curis can grow as a company and benefit from the clinical trial expertise of our collaborators. As part of our agreement with Procter & Gamble for hair growth, we have the option to co-develop the product from IND filing through Phase II
clinical trials. Mr. Passeri continued, We were very pleased that Genentech has selected a lead candidate, a small molecule antagonist of the Hedgehog pathway, in our solid tumor cancer program. In addition, we believe that
Genentech s election to extend funding of our scientists serves as further validation of the contribution that our scientists are providing to this program.
We will hold a conference call today, November 14, 2005, at 10:00 A.M. EST, to discuss our financial results, the progress of our
therapeutic product development programs, and additional corporate activities. Daniel Passeri will host the call.
To access the live conference call, please call (866) 800-8649 from the United States or Canada or (617) 614-2703 from other locations, shortly before 10:00
A.M. The conference ID number is 69069207. Replay will be available approximately two hours after the completion of the call and through 5:00 P.M. EST, Monday, November 28, 2005. To access the replay, please call (888) 286-8010 from the
United States or Canada or (617) 801-6888 from other locations and reference the conference ID number 92603021.
CONSOLIDATED STATEMENTS OF OPERATIONS
| Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
| 2005 | 2004 | 2005 | 2004 | |||||||||||||
| Revenues: | ||||||||||||||||
| Research and development contracts | $ | 2,626,072 | $ | 1,100,881 | $ | 7,358,750 | $ | 2,289,033 | ||||||||
| License fees | 8,561 | 385,345 | 892,295 | 1,123,067 | ||||||||||||
| Substantive milestones | 250,000 | 50,000 | ||||||||||||||
| Gross revenues | 2,634,633 | 1,486,226 | 8,501,045 | 3,462,100 | ||||||||||||
| Contra-revenues from co-development with Genentech | (819,491 | ) | (5,697,993 | ) | ||||||||||||
| Net revenues | 1,815,142 | 1,486,226 | 2,803,052 | 3,462,100 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| Research and development | 3,820,650 | 3,288,472 | 10,647,659 | 9,448,534 | ||||||||||||
| General and administrative | 1,832,802 | 2,138,070 | 6,141,013 | 6,460,769 | ||||||||||||
| Amortization of intangible assets | 18,768 | 18,768 | 56,304 | 56,304 | ||||||||||||
| Total operating expenses | 5,672,220 | 5,445,310 | 16,844,976 | 15,965,607 | ||||||||||||
| Net loss from operations | (3,857,078 | ) | (3,959,084 | ) | (14,041,924 | ) | (12,503,507 | ) | ||||||||
| Other income, net | 226,365 | 53,384 | 623,308 | 258,622 | ||||||||||||
| Net loss | $ | (3,630,713 | ) | $ | (3,905,700 | ) | $ | (13,418,616 | ) | $ | (12,244,885 | ) | ||||
| Basic and diluted net loss per common share | $ | (0.08 | ) | $ | (0.09 | ) | $ | (0.28 | ) | $ | (0.30 | ) | ||||
| Basic and diluted weighted average common shares outstanding | 48,178,626 | 41,620,123 | 47,998,663 | 41,398,656 |
CONSOLIDATED BALANCE SHEETS
| September 30, 2005 (unaudited) | December 31, 2004 | |||||
| ASSETS | ||||||
| Cash, cash equivalents, marketable securities and long-term investments | $ | 42,898,327 | $ | 52,120,643 | ||
| Long-term investments restricted | 195,998 | 193,166 | ||||
| Accounts receivable | 2,026,140 | 1,226,460 | ||||
| Property and equipment, net | 5,015,497 | 3,416,620 | ||||
| Intangible assets, net | 9,027,818 | 9,084,122 | ||||
| Other assets | 1,544,486 | 1,593,802 | ||||
| Total assets | $ | 60,708,266 | $ | 67,634,813 | ||
| LIABILITIES AND STOCKHOLDERS EQUITY | ||||||
| Accounts payable and accrued expenses | $ | 3,592,658 | $ | 2,721,906 | ||
| Debt obligations | 2,822,180 | 1,141,294 | ||||
| Convertible debt | 2,556,962 | 5,710,007 | ||||
| Deferred revenue | 9,443,137 | 8,881,253 | ||||
| Other long-term liabilities | 763,800 | 271,058 | ||||
| Total liabilities | 19,178,737 | 18,725,518 | ||||
| Total stockholders equity | 41,529,529 | 48,909,295 | ||||
| Total liabilities and stockholders equity | $ | 60,708,266 | $ | 67,634,813 |
Curis, Inc. is a therapeutic drug development company. The Company s technology focus is on regulatory pathways that control repair and regeneration. Curis
product development involves the use of proteins or small molecules to modulate these pathways. Curis has successfully used this technology and product development approach to produce several promising drug product candidates in the fields of cancer
(under two collaborations with Genentech, one of which includes a co-development arrangement for a basal cell carcinoma product candidate that is currently in Phase I clinical trials), neurological disorders (under collaboration with Wyeth), hair
growth (under collaboration with Procter & Gamble), kidney disease and other disorders (licensed to Ortho Biotech Products and under development at Centocor, both subsidiaries of Johnson & Johnson), and cardiovascular disease.
Curis also possesses robust small molecule drug screening technologies and preclinical scientific expertise that Curis believes it can use to create a sustainable drug candidate pipeline including, for example, its efforts in Spinal Muscular Atrophy
(under sponsored research agreement with the Spinal Muscular Atrophy Foundation). For more information, please visit the Curis web site at www.curis.com.
Cautionary Statement: This press release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995,
including statements concerning Curis financial results and expected year-end cash position, the potential effectiveness of its technologies under development and the Company s belief that it can grow as a company through its
co-development arrangements and the clinical expertise of it collaborators. Forward-looking statements used in this press release may contain the words believes , expects , anticipates , plans ,
seeks , estimates or similar expressions. These forward-looking statements are not guarantees of future performance and involve risks, uncertainties, assumptions and other factors that may cause Curis actual results to
be materially different from those indicated by such forward-looking statements. Actual results can be affected by a number of important factors including, among other things: adverse results in Curis and its strategic collaborators and
licensees product development programs; delays in enrolling patients for its basal cell carcinoma clinical trial, difficulties or delays in obtaining or maintaining required regulatory approvals for products being developed by Curis and its
collaborators and licensees; Curis ability to obtain or maintain the patent and other proprietary intellectual property protection necessary for the development and commercialization of products based on its technologies; changes in or
Curis inability to execute its business plan; the risk that Curis does not obtain the additional funding required to conduct research and development of its product candidates, fund its co-development obligations under its collaboration with
Genentech and execute its business plan; unplanned cash requirements and expenditures; risks relating to Curis ability to enter into and maintain important strategic collaborations, including its ability to maintain its current collaboration
agreements with Genentech, Wyeth and Ortho Biotech Products; the risk that competitors will discover and develop signaling pathway-based or other competing therapeutics faster and more successfully than Curis and its collaborators are able to; and
other risk factors identified in Curis most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and subsequent reports periodically filed with the Securities and Exchange Commission. In addition, any forward-looking statements
represent the Company s views only as of today and should not be relied upon as representing its views as of any subsequent date. Curis disclaims any intention or obligation to update any of the forward-looking statements after the date of this
press release whether as a result of new information, future events or otherwise.
Chief Financial Officer
Director, Corporate Communications