s
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from________ to_________.
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
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(Address of principal executive offices) |
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(Registrant’s telephone number, including area code)
(Former Name, Former Address and Former Fiscal Year if Changed Since Last Report): N/A
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class |
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Trading Symbol |
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Name of Each Exchange on Which Registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 4, 2022,
CORBUS PHARMACEUTICALS HOLDINGS, INC.
Quarterly Report on Form 10-Q for the Quarter Ended September 30, 2022
TABLE OF CONTENTS
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PART I |
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FINANCIAL INFORMATION |
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3 |
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Condensed Consolidated Balance Sheets as of September 30, 2022 (unaudited) and December 31, 2021 |
3 |
4 |
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5 |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
8 |
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
26 |
3. Quantitative and Qualitative Disclosures about Market Risk |
33 |
33 |
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PART II |
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OTHER INFORMATION |
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34 |
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1A. Risk Factors |
34 |
2. Unregistered Sales of Equity Securities and Use of Proceeds |
34 |
34 |
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34 |
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34 |
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6. Exhibits |
35 |
-2-
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements.
Corbus Pharmaceuticals Holdings, Inc.
Condensed Consolidated Balance Sheets
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September 30, 2022 |
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December 31, 2021 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Investments |
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Restricted cash |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Operating lease right of use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Notes payable |
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$ |
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$ |
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Accounts payable |
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Accrued expenses |
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Derivative liability |
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Operating lease liabilities, current |
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Current portion of long-term debt |
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Total current liabilities |
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Long-term debt, net of debt discount |
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Other long-term liabilities |
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Operating lease liabilities, noncurrent |
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Total liabilities |
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Stockholders’ equity |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Accumulated other comprehensive loss |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See notes to the unaudited condensed consolidated financial statements.
-3-
Corbus Pharmaceuticals Holdings, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
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For the Three Months |
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For the Nine Months |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenue from awards |
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$ |
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$ |
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$ |
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$ |
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Operating expenses: |
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Research and development |
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General and administrative |
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Litigation Settlement |
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Total operating expenses |
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Operating loss |
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Other income (expense), net: |
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Other income (expense), net |
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Interest income (expense), net |
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( |
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Change in fair value of derivative liability |
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Foreign currency exchange gain (loss), net |
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( |
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Other income (expense), net |
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( |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
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$ |
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Net loss per share, basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted average number of common shares outstanding, basic and diluted |
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Comprehensive loss: |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income (loss): |
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Change in unrealized gain (loss) on marketable debt securities |
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Total other comprehensive income (loss) |
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( |
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( |
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( |
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Total comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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See notes to the unaudited condensed consolidated financial statements.
-4-
Corbus Pharmaceuticals Holdings, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
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For the Three Months Ended September 30, 2022 |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at June 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock, net of issuance costs of $ |
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( |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Change in unrealized gain (loss) on marketable debt securities |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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For the Three Months Ended September 30, 2021 |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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Change in unrealized gain (loss) on marketable debt securities |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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See notes to the unaudited condensed consolidated financial statements.
-5-
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For the Nine Months Ended September 30, 2022 |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock, net of issuance costs of $ |
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( |
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— |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Change in unrealized gain (loss) on marketable debt securities |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Balance at September 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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For the Nine Months Ended September 30, 2021 |
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Loss |
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Equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
— |
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$ |
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Issuance of common stock, net of issuance costs of $ |
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— |
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— |
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Stock-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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Change in unrealized gain (loss) on marketable debt securities |
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— |
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— |
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— |
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— |
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( |
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( |
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Net loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Balance at September 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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See notes to the unaudited condensed consolidated financial statements.
-6-
Corbus Pharmaceuticals Holdings, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
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Nine Months Ended |
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2022 |
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2021 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation expense |
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Depreciation and amortization |
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Net amortization on premium of investments |
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Loss on foreign exchange |
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Operating lease right of use asset amortization |
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Amortization of debt discount |
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Realized loss on investments |
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Change in fair value of derivative liability |
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Loss on sale of property and equipment |
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Changes in operating assets and liabilities: |
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Decrease in prepaid expenses |
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Increase in contract asset |
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( |
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(Increase) decrease in other assets |
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( |
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Decrease in accounts payable |
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( |
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( |
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Decrease in accrued expenses |
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( |
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( |
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Decrease in operating lease liabilities |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities: |
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Purchases of investments |
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( |
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( |
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Proceeds from sales and maturities of investments |
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Purchases of property and equipment |
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( |
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Proceeds from sale of property and equipment |
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Net cash provided by (used in) investing activities |
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( |
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Cash flows from financing activities: |
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Repayment of short-term borrowings |
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( |
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( |
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Proceeds from issuance of common stock |
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Issuance costs paid for common stock financings |
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( |
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Net cash (used in) provided by financing activities |
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( |
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Net decrease in cash, cash equivalents, and restricted cash |
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( |
) |
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( |
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Cash, cash equivalents, and restricted cash at beginning of the period |
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Cash, cash equivalents, and restricted cash at end of the period |
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$ |
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$ |
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Supplemental disclosure of cash flow information and non-cash transactions: |
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Cash paid during the period for interest |
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$ |
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$ |
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See notes to the unaudited condensed consolidated financial statements.
-7-
Corbus Pharmaceuticals Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2022
1. NATURE OF OPERATIONS
Business
Corbus Pharmaceuticals Holdings, Inc. (the “Company” or “Corbus”) is focused on the development of immune modulators that will have application in disease states spanning from immuno-oncology to fibrosis. Corbus’ current pipeline includes anti-integrin monoclonal antibodies that block activation of TGFβ and small molecules that activate or inhibit the endocannabinoid system. The Company plans to expand its pipeline in immuno-oncology through internal efforts and business development. Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. The Company’s business is subject to significant risks and uncertainties and the Company will be dependent on raising substantial additional capital before it becomes profitable and it may never achieve profitability.
The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. In the opinion of management of the Company, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly, in all material respects, the consolidated financial position of the Company as of September 30, 2022 and the results of its operations and changes in stockholders’ equity for the three and nine months ended September 30, 2022 and 2021 and its cash flows for the nine months ended September 30, 2022 and 2021. The December 31, 2021 condensed consolidated balance sheet was derived from audited financial statements. The Company prepared the condensed consolidated financial statements following the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP) have been condensed or omitted. It is suggested that these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, filed on March 8, 2022 (the “2021 Annual Report”). The results of operations for such interim periods are not necessarily indicative of the operating results for the full fiscal year.
The Company is continuing to monitor the impact of the COVID-19 pandemic on its business and operations.
2. LIQUIDITY
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern, which contemplates continuity of operations, realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The Company has incurred recurring losses since inception and as of September 30, 2022, had an accumulated deficit of $. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research funding, development of its product candidates and its preclinical and clinical programs, strategic alliances and the development of its administrative organization. The Company expects the cash, cash equivalents, and investments of approximately $
The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of the Company’s clinical development programs. Funding may not be available when needed, at all, or on terms acceptable to the Company. Lack of necessary funds may require the Company to, among other things, delay, scale back or eliminate some or all of the Company’s planned clinical or preclinical trials.
-8-
3. SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies followed by the Company in the preparation of the financial statements is as follows:
Consolidation
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates and changes in estimates may occur. The most significant estimates are related to stock-based compensation, the accrual of research, product development and clinical obligations, lease obligations, and the valuation of warrants discussed in Note 14.
Cash, Cash Equivalents, and Restricted Cash
The Company considers only those investments which are highly liquid, readily convertible to cash, and that mature within three months from date of purchase to be cash equivalents. At September 30, 2022 and December 31, 2021, cash equivalents were comprised of money market funds.
Restricted cash as of September 30, 2022 included security for a stand-by letter of credit issued in favor of a landlord for $
Cash, cash equivalents, and restricted cash consisted of the following:
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September 30, 2022 |
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December 31, 2021 |
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Cash |
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$ |
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$ |
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Cash Equivalents |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash, current |
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Restricted cash, noncurrent |
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Restricted cash |
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Total cash, cash equivalents, and restricted cash shown in the statement of cash |
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$ |
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$ |
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As of September 30, 2022, all of the Company’s cash and cash equivalents was held in the United States, except for approximately $
Investments
Investments consist of debt securities and term deposits with maturities greater than 90 days at their acquisition date. The Company has classified its investments with maturities beyond one year as current, based on their highly liquid nature and because such marketable securities represent the investment of cash that is available for current operations.
The Company classifies all of its marketable debt securities as available-for-sale securities. The Company’s marketable debt securities are measured and reported at fair value using quoted prices in active markets for similar securities. Unrealized gains and losses on available-for-sale debt securities are reported as accumulated other comprehensive gain or loss, which is a separate component of stockholders’ equity. The cost of debt securities sold is determined on a specific identification basis, and realized gains and losses are included in other income (expense), net in the consolidated statements of operations and comprehensive loss.
-9-
The Company evaluates its marketable debt securities with unrealized losses for other-than-temporary impairment. When assessing marketable debt securities for other-than-temporary declines in value, the Company considers such factors as, among other things, how significant the decline in value is as a percentage of the original cost, how long the market value of the investment has been less than its original cost, the Company’s ability and intent to retain the investment for a period of time sufficient to allow for any anticipated recovery in fair value and market conditions in general. If any adjustment to fair value reflects a decline in the value of the investment that the Company considers to be “other than temporary,” the Company reduces the investment to fair value through a charge to the statements of operations and comprehensive loss. No such adjustments were necessary during the periods presented.
Financial Instruments
The carrying values of the notes payable and debt approximate their fair value due to the fact that they are at market terms.
Fair Value Measurements
The valuation of the Company’s debt and embedded derivatives are determined primarily by an income approach that considers the present value of net cash flows of the debt with and without prepayment and default features. These embedded debt features, which are determined to be classified as derivative liabilities are marked-to-market each reporting period, with a corresponding non-cash gain or loss charged to the current period. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, there exists a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access as of the measurement date.
Level 2 – Inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.
Level 3 – Unobservable inputs for the asset or liability only used when there is little, if any, market activity for the asset or liability at the measurement date.
The Company’s investments, debt, and its derivative liabilities are carried at fair value determined according to the fair value hierarchy described above. The carrying values of the Company’s prepaid expenses and other current assets, and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
To determine the fair value of our embedded derivatives, management evaluates assumptions regarding the probability of certain future events. Other factors used to determine fair value include the discount rate, risk free interest rate and derivative term. The fair value recorded for the derivative liability varies from period to period. This variability may result in the actual derivative liability for a period either above or below the estimates recorded on our consolidated financial statements, resulting in fluctuations in other income (expense) because of the corresponding non-cash gain or loss recorded.
Property and Equipment
The estimated life for the Company’s property and equipment is as follows:
Research and Development Expenses
Costs incurred for research and development are expensed as incurred.
Nonrefundable advance payments for goods or services that have the characteristics that will be used or rendered for future research and development activities pursuant to executory contractual arrangements with third party research organizations are deferred and recognized as an expense as the related goods are delivered or the related services are performed.
-10-
Accruals for Research and Development Expenses and Clinical Trials
As part of the process of preparing its financial statements, the Company is required to estimate its expenses resulting from its obligations under contracts with vendors, clinical research organizations and consultants and under clinical site agreements in connection with conducting clinical trials. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payment terms that do not match the periods over which materials or services are provided under such contracts. The Company’s objective is to reflect the appropriate expenses in its financial statements by matching those expenses with the period in which services are performed and efforts are expended. The Company accounts for these expenses according to the timing of various aspects of the expenses. The Company determines accrual estimates by taking into account discussion with applicable internal personnel and outside service providers as to the progress of clinical trials, or the services completed. During the course of a clinical trial, the Company adjusts its clinical expense recognition if actual results differ from its estimates. The Company makes estimates of its accrued expenses as of each balance sheet date based on the facts and circumstances known to it at that time. The Company’s clinical trial accruals are dependent upon the timely and accurate reporting of contract research organizations (“CROs”) and other third-party vendors. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in it reporting amounts that are too high or too low for any particular period. For the three and nine months ended September 30, 2022 and 2021, there were no material adjustments to the Company’s prior period estimates of accrued expenses for clinical trials.
Leases
The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities, current and noncurrent in the Company’s consolidated balance sheets.
ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This is the rate the Company would have to pay if borrowing on a collateralized basis over a similar term to each lease. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company has subleased a portion of its leased facility under an agreement considered to be an operating lease according to GAAP. The Company has not been legally released from its primary obligations under the original lease and therefore it continues to account for the original lease as it did before commencement of the sublease. The Company will record both fixed and variable payments received from the sublessee in its statements of operations and comprehensive loss on a straight-line basis as an offset to rent expense.
Concentrations of Credit Risk
The Company has no significant off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other hedging arrangements. The Company may from time to time have cash in banks in excess of Federal Deposit Insurance Corporation insurance limits. However, the Company believes the risk of loss is minimal as these banks are large financial institutions.
Segment Information
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker, or decision-making group, in making decisions regarding resource allocation and assessing performance. To date, the Company has viewed its operations and manages its business as principally one operating segment, which is developing and commercializing therapeutics for autoimmunity, fibrosis, and cancer. As of September 30, 2022, all of the Company’s assets were located in the United States, except for approximately $
-11-
Income Taxes
For federal and state income taxes, deferred tax assets and liabilities are recognized based upon temporary differences between the financial statement and the tax basis of assets and liabilities. Deferred income taxes are based upon prescribed rates and enacted laws applicable to periods in which differences are expected to reverse. A valuation allowance is recorded to reduce a net deferred tax benefit when it is not more likely than not that the tax benefit from the deferred tax assets will be realized. Accordingly, given the cumulative losses since inception, the Company has provided a valuation allowance equal to
Tax positions taken or expected to be taken in the course of preparing the Company’s tax returns are required to be evaluated to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet a more-likely-than-not threshold, as well as accrued interest and penalties, if any, would be recorded as a tax expense in the current year. There were
Impairment of Long-lived Assets
The Company continually monitors events and changes in circumstances that could indicate that carrying amounts of long-lived assets may not be recoverable. An impairment loss is recognized when expected undiscounted cash flows of an asset are less than an asset’s carrying value. Accordingly, when indicators of impairment are present, the Company evaluates the carrying value of such assets in relation to the operating performance and future undiscounted cash flows of the underlying assets. An impairment loss equal to the excess of the fair value of the asset over its carrying amount, is recorded when it is determined that the carrying value of the asset may not be recoverable. The Company recognized an impairment loss of approximately $
Stock-based Payments
The Company recognizes compensation costs resulting from the issuance of stock-based awards to employees, non-employees and directors as an expense in the statements of operations and comprehensive loss over the service period based on a measurement of fair value for each stock-based award. The fair value of each option grant is estimated as of the date of grant using the Black-Scholes option-pricing model, net of estimated forfeitures. The fair value of each option grant is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period.
Foreign Currency
Transaction gains and losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the U.S. Dollar functional currency are recorded in the Company’s statements of operations and comprehensive loss. Such transaction gains and losses may be realized or unrealized depending upon whether the transaction settled during the period or remains outstanding at the balance sheet date. The functional currency of the Company's foreign subsidiaries is the U.S. dollar.
Net Loss Per Common Share
Net loss per share was computed as follows:
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Three Months Ended |
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Nine Months Ended |
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2022 |
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2021 |
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2022 |
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2021 |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Weighted average number of common shares-basic |
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Net loss per share of common stock-basic |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
* Warrants and options that have not been exercised have been excluded from the diluted calculation as all periods presented have a net loss and the impact of these securities would be anti-dilutive
-12-
Recently Adopted Accounting Pronouncements
In May 2021, the FSB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options which is intended to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification of exchange. This standard is effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted. The Company’s adoption of ASU 2021-04 as of January 1, 2022 had no impact on the Company’s financial statements and related disclosures.
Recently Issued Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity which is intended to simplify various aspects of GAAP for certain financial instruments with characteristics of liabilities and equity. The standard is effective for public companies that meet the definition of an SEC filer, excluding entities that are smaller reporting companies as defined by the SEC, for fiscal years, and interim periods within those years, beginning after December 15, 2021. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. This standard will be effective for the Company on January 1, 2024 or when it ceases being eligible to be a smaller reporting company. The Company is currently evaluating the timing of the adoption of ASU 2020-06 and the potential impact that this standard may have on its consolidated financial statements and related disclosures.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes may result in earlier recognition of credit losses. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, which narrowed the scope and changed the effective date for non-public entities for ASU 2016-13. The FASB subsequently issued supplemental guidance within ASU No. 2019-05, Financial Instruments—Credit Losses (Topic 326): Targeted Transition Relief (“ASU 2019-05”). ASU 2019-05 provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. For public entities that are SEC filers, excluding entities that are eligible to be smaller reporting companies, ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. For all other entities, ASU 2016-13 is effective for annual periods beginning after December 15, 2022, including interim periods within those fiscal years. Early adoption is permitted. This standard will be effective for the Company on January 1, 2023 or when it ceases being eligible to be a smaller reporting company. The Company is currently evaluating the potential impact that this standard may have on its consolidated financial statements and related disclosures.
-13-
4. INVESTMENTS
The following table summarizes the Company’s investments as of September 30, 2022 (in thousands):
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Amortized Cost |
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Gross |
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Gross |
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Fair Value |
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Debt Securities: |
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Commercial paper |
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$ |
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$ |
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$ |
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$ |
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Corporate debt securities |
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( |
) |
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Total |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The following table summarizes the amortized cost and fair value of the Company’s available-for-sale marketable securities by contractual maturity as of September 30, 2022 (in thousands):
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Amortized Cost |
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Fair Value |
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Maturing in one year or less |
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$ |
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$ |
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Maturing after one year but less than three years |
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$ |
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$ |
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The following table summarizes the Company’s investments as of December 31, 2021 (in thousands):
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Amortized Cost |
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Gross |
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Gross |
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Fair Value |
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Debt Securities: |
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Commercial paper |
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$ |
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$ |
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$ |
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$ |
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Corporate debt securities |
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( |
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Asset backed securities |
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( |
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Other Investments: |
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Term deposits (Matured 2/20/2022 - 5/5/2022) |
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Total |
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$ |
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$ |
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$ |
( |
) |
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$ |
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The following table summarizes the amortized cost and fair value of the Company’s available-for-sale marketable securities by contractual maturity as of December 31, 2021 (in thousands):
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Amortized Cost |
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Fair Value |
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Maturing in one year or less |
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$ |
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$ |
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Maturing after one year but less than three years |
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$ |
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$ |
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-14-
5. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values as of September 30, 2022 (in thousands):
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets: |
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Cash Equivalents: |
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Money market funds |
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$ |
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$ |
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$ |
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$ |
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Investments: |
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Commercial paper |
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Corporate debt securities |
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$ |
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$ |
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$ |
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$ |
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Liabilities: |
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Derivative liabilities |
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$ |
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$ |
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$ |
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$ |
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The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values as of December 31, 2021 (in thousands):
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Assets: |
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Cash Equivalents: |
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Money Market funds |
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$ |
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$ |
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$ |
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$ |
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Investments: |
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Term deposits |
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Commercial paper |
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Corporate debt securities |
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Asset backed securities |
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$ |
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$ |
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$ |
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$ |
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Liabilities: |
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Derivative liabilities |
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$ |
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$ |
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$ |
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$ |
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-15-
6. LICENSE AGREEMENTS
The Company entered into a license agreement (the “Jenrin Agreement”) with Jenrin Discovery, LLC, a privately-held Delaware limited liability company (“Jenrin”), effective September 20, 2018. Pursuant to the Jenrin Agreement, Jenrin granted the Company exclusive worldwide rights to develop and commercialize the Licensed Products (as defined in the Jenrin Agreement) which includes the Jenrin library of over 600 compounds and multiple issued and pending patent filings. The compounds are designed to treat inflammatory and fibrotic diseases by targeting the endocannabinoid system.
In consideration of the license and other rights granted by Jenrin, the Company paid Jenrin a $
The Company entered into a license agreement (the “Milky Way License Agreement”) with Milky Way BioPharma, LLC (“Milky Way”), a subsidiary of Panorama Research Inc., effective May 25, 2021. Pursuant to the Milky Way License Agreement, the Company received an exclusive license, under certain patent rights and know-how owned or controlled by Milky Way, to develop, commercialize, and otherwise exploit products containing antibodies against integrin αvβ6 and/or integrin αvβ8 (“Licensed Products”), one of which the Company is referring to as CRB-602. Under the terms of the Milky Way License Agreement, the Company will have sole responsibility for research, development, and commercialization of any Licensed Products, and Company has agreed to use commercially reasonable efforts to perform these activities.
In consideration for the license and other rights granted to the Company under the Milky Way License Agreement, the Company paid Milky Way an upfront payment of $
The Company entered into a license agreement (the “UCSF License Agreement”) with the Regents of the University of California (“The Regents”) effective May 26, 2021. Pursuant to the UCSF License Agreement, the Company received an exclusive license to certain patents relating to humanized antibodies against integrin αvβ8, one of which the Company is referring to as CRB-601, along with non-exclusive licenses to certain related know-how and materials.
In consideration for the license and other rights granted to the Company under the UCSF License Agreement, the Company paid The Regents a license issue fee of $
The Company determined that substantially all of the fair value of the Jenrin Agreement was attributable to a single in-process research and development asset which did not constitute a business. The Company determined that substantially all of the fair value of the Milky Way License Agreement and the UCSF License Agreement was attributable to separate groups of in-process research and development assets which did not constitute a business. The Company concluded that it did not have any alternative future use for the acquired in-process research and development assets. Thus, the Company recorded the various upfront payment to research and development expenses in the quarter the license deals became effective. The Company will account for the development, regulatory, and sales milestone payments in the period that the relevant milestones are achieved as either research and development expense or as an intangible asset as applicable. To date, the Company has made no milestone payments under any of the above agreements.
-16-
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
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September 30, |
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December 31, |
|
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Computer hardware and software |
|
$ |
|
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$ |
|
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Office furniture and equipment |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Property and equipment, gross |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation expense was $
8. COMMITMENTS AND CONTINGENCIES
Operating Lease Commitment
Pursuant to the terms of the Company’s non-cancelable lease agreements in effect at September 30, 2022, the following table summarizes the Company’s maturities of operating lease liabilities as of September 30, 2022:
2022 (Remainder of year) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Total lease payments |
|
$ |
|
|
|
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total |
|
$ |
|
|
Sublease Commitment
Undiscounted sublease cash inflows have been summarized in the following table:
2022 (Remainder of year) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
2026 |
|
|
|
|
Total sublease payments |
|
$ |
|
Legal Proceedings
On May 12, 2022, the Company entered into a binding term sheet (the “Settlement ”) with Venn Therapeutics, LLC, (“Venn”) to resolve the claims by Venn against the Company, its Chief Executive Officer, and a former employee which were previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2022.
Under the terms of the Settlement, the Company made a $
-17-
9. NOTES PAYABLE
D&O Financing
In November 2020, the Company entered into a loan agreement with a financing company for $
In November 2021, the Company entered into a loan agreement with a financing company for $
Loan and Security Agreement with K2 HealthVentures LLC
On July 28, 2020, the Company, with its subsidiary, Corbus Pharmaceuticals, Inc., as borrower, entered into a $
K2HV may elect to convert up to $
In connection with the Loan Agreement, on July 28, 2020, the Company issued to the Lenders (as defined in the Loan Agreement) a warrant to purchase up to
The total principal amount of the loan under the Loan Agreement outstanding at September 30, 2022, including the $
Upon the occurrence of an Event of Default (as defined in the Loan Agreement), and during the continuance of an Event of Default, the applicable rate of interest, described above, will be increased by
The total debt discount related to Lenders of approximately $
-18-
The net carrying amounts of the liability components consists of the following:
|
|
September 30, 2022 |
|
|
December 31, 2021 |
|
||
|
|
|
|
|
|
|
||
Principal |
|
$ |
|
|
$ |
|
||
Less: debt discount |
|
|
( |
) |
|
|
( |
) |
Accretion of Debt Discount |
|
|
|
|
|
|
||
Net Carrying amount |
|
$ |
|
|
$ |
|
||
Less: current portion of long term debt |
|
$ |
( |
) |
|
$ |
( |
) |
Total long-term debt, net of discount |
|
$ |
|
|
$ |
|
||
The following table summarizes the future principal payments due under long-term debt;
|
|
Principal Payments and final payment on Loan Agreement |
|
|
|
|
|
|
|
Remaining 2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
Total |
|
$ |
|
|
10. ACCRUED EXPENSES
Accrued expenses consisted of the following:
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
|
|
|
||
Accrued pre-clinical and clinical costs |
|
$ |
|
|
$ |
|
||
Accrued product development costs |
|
|
|
|
|
|
||
Accrued compensation |
|
|
|
|
|
|
||
Accrued administrative costs |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
-19-
11. DEVELOPMENT AWARDS
2018 CFF Award
On January 26, 2018, the Company entered into the Cystic Fibrosis Program Related Investment Agreement with the CFF, a non-profit drug discovery and development corporation, pursuant to which the Company received an award for up to $
Additionally, the Company is obligated to make (i) royalty payments to CFF of two and one-half percent of net sales from lenabasum due within sixty days after any quarter in which such net sales occur in the Field (as defined in the Investment Agreement), (ii) royalty payments to CFF of one percent of net sales of Non-Field Products (as defined in the Investment Agreement) due within sixty days after any quarter in which such net sales occur, and (iii) royalty payment to CFF of
Either CFF or the Company may terminate the Investment Agreement for cause, which includes the Company’s material failure to achieve certain commercialization and development milestones. The Company’s payment obligations survive the termination of the Investment Agreement.
Pursuant to the terms of the Investment Agreement, the Company issued a warrant to CFF to purchase an aggregate of
Under the Investment Agreement, the Company recorded
-20-
To determine the transaction price, the Company included the total aggregate payments under the Investment Agreement which amount to $
The Company has invoiced and received $
The CFF Warrant is accounted for as a payment to the customer. See Note 14 for further information related to the CFF Warrant. The Company notes that the Investment Agreement contains an initial payment that was received upon contract execution and subsequent milestone payments, which are a form of variable consideration that require evaluation for constraint considerations. The Company concluded that the related performance milestones are generally within the Company’s control and as result are considered probable. Revenue associated with the performance obligation is being recognized as revenue as the research and development services are provided using an input method, according to the costs incurred as related to the research and development activities on each program and the costs expected to be incurred in the future to satisfy the performance obligation. The transfer of control occurs over this time period and, in management’s judgment, is the best measure of progress towards satisfying the performance obligation. The research and development services related to this performance obligation were performed over approximately three-year period and were completed in 2021. The amounts recognized as revenue, but not received or invoiced were recognized as a contract asset on the Company’s consolidated balance sheet.
12. COMMON STOCK
The Company has authorized
On August 7, 2020, the Company entered into the August 2020 Sale Agreement with Jefferies pursuant to which Jefferies is serving as the Company’s sales agent to sell shares of the Company’s common stock through an “at the market offering.” As of August 7, 2020, the Company was authorized to sell up to $
During the three and nine months ended September 30, 2022, the Company issued
During the three and nine months ended September 30, 2021, the Company issued
During the three and nine months ended September 30, 2022, the Company issued
-21-
13. STOCK BASED AWARDS
In April 2014, the Company adopted the Corbus Pharmaceuticals Holdings, Inc. 2014 Equity Incentive Plan (the “2014 Plan”). Pursuant to the 2014 Plan, the Company’s Board of Directors (the "Board") may grant incentive and nonqualified stock options and restricted stock to employees, officers, directors, consultants and advisors.
Pursuant to the terms of an annual evergreen provision in the 2014 Plan, the number of shares of common stock available for issuance under the 2014 Plan shall automatically increase on January 1 of each year by at least seven percent (
In accordance with the terms of the 2014 Plan, and pursuant to the annual evergreen provision contained in the 2014 Plan, effective as of January 1, 2022, the number of shares of common stock available for issuance under the 2014 Plan increased by
In accordance with the terms of the 2014 Plan, and pursuant to the annual evergreen provision contained in the 2014 plan, effective as of January 1, 2021, the number of shares of common stock available for issuance under the 2014 Plan increased by
Share-based Compensation
For stock options awarded and outstanding and restricted stock awards for the three months ended September 30, 2022 and 2021, respectively, the Company recorded non-cash, stock-based compensation expense of $
Stock-based compensation expense was classified in the consolidated statements of operations and comprehensive loss as follows:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development expenses |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
General and administrative expenses |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total stock-based compensation |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. The Company uses historical data, as well as subsequent events occurring prior to the issuance of the financial statements, to estimate option exercises and employee terminations in order to estimate its forfeiture rate. The expected term of options granted under the 2014 Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is determined based on the simplified method due to the Company’s limited operating history, and is
The weighted average assumptions used principally in determining the fair value of options granted to employees were as follows:
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Risk free interest rate |
|
|
% |
|
|
% |
||
Expected dividend yield |
|
|
% |
|
|
% |
||
Expected term in years |
|
|
|
|
|
|
||
Expected volatility |
|
|
% |
|
|
% |
||
Estimated forfeiture rate |
|
|
% |
|
|
% |
||
-22-
A summary of option activity for the nine months ended September 30, 2022 and is presented below:
Options |
|
Shares |
|
|
Weighted |
|
|
Weighted Average |
|
|
Aggregate |
|
||||
Outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
|
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Expired |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at September 30, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
The weighted average grant-date fair value of options granted during the nine months ended September 30, 2022 and 2021 was $
In January 2022, the Company granted a restricted stock award of
-23-
14. WARRANTS
At September 30, 2022, there were warrants outstanding to purchase
The Company issued a warrant to CFF in January 2018, to purchase an aggregate of
Risk free interest rate |
|
|
% |
|
Expected dividend yield |
|
|
% |
|
Expected term in years |
|
|
|
|
Expected volatility |
|
|
% |
On July 28, 2020, the Company entered into the Loan Agreement with K2HV pursuant to which K2HV may provide the Company with term loans in an aggregate principal amount of up to $
Risk free interest rate |
|
|
% |
|
Expected dividend yield |
|
|
% |
|
Expected term in years |
|
|
|
|
Expected volatility |
|
|
% |
On October 16, 2020, the Company entered into a professional services agreement with an investor relations service provider. Pursuant to the agreement, the Company issued warrants exercisable for a total of
Risk free interest rate |
|
|
% |
|
Expected dividend yield |
|
|
% |
|
Expected term in years |
|
|
|
|
Expected volatility |
|
|
% |
-24-
15. DERIVATIVE LIABILITY
On July 28, 2020, the Company, with its subsidiary, Corbus Pharmaceuticals, Inc., as borrower, entered into a $
The value of these features are determined each reporting period by taking the present value of net cash flows with and without the prepayment features. The significant assumption used to determine the fair value of the debt without any features is the discount rate which has been estimated by using published market rates of triple CCC rated public companies. All other inputs are taken from the Loan Agreement. The additional significant assumptions used when valuing the prepayment feature is the probability of a change of control event. The Company has determined the probability from December 31, 2021 to September 30, 2022 has stayed consistent. The additional significant assumption used when valuing the default feature is the probability of defaulting on the repayment of loan. The Company has determined the probability from December 31, 2021 to September 30, 2022 has remained consistent. The value of these features was determined to be approximately $
A roll forward of the fair value of the derivative liabilities for the nine months ended September 30, 2022 is presented below.
|
|
September 30, 2022 |
|
|
Beginning balance, December 31, 2021 |
|
$ |
|
|
Change in fair value of derivative liabilities |
|
|
|
|
Ending balance, September 30, 2022 |
|
$ |
|
|
16.
Common Stock Dividend of Series A Preferred Stock
On October 12, 2022, the Board declared a dividend of
Amended Loan and Security Agreement with K2 HealthVentures LLC
On October 25, 2022, the Company, with its subsidiary, Corbus Pharmaceuticals, Inc., as borrower, entered into an amendment to the Loan and Security Agreement dated as of July 28, 2020 with K2 HealthVentures LLC (“K2HV”), an unrelated third party to defer the commencement of principal repayments by a one year period from September 1, 2022 to September 1, 2023 and if the Company raises at least $
-25-
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. |
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and the related notes and the other financial information included elsewhere in this Quarterly Report. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those discussed below and elsewhere in this Quarterly Report, particularly those under “Risk Factors.”
Overview
Corbus Pharmaceuticals Holdings, Inc. (the “Company” or “Corbus”) is focused on the development of immune modulators that will have application in disease states spanning from immuno-oncology to fibrosis. Corbus’ current pipeline includes anti-integrin monoclonal antibodies that block activation of TGFβ and small molecules that activate or inhibit the endocannabinoid system. The company plans to expand its pipeline in immuno-oncology through internal efforts and business development.
The pipeline includes the following programs:
Financial Operations Overview
We are an immunology company and have not generated any revenues from the sale of products. We have never been profitable and at September 30, 2022, we had an accumulated deficit of approximately $381,202,000. Our net losses for the three months ended September 30, 2022 and 2021, were approximately $8,782,000 and $2,176,000, respectively. For nine months ended September 30, 2022 and 2021, our net losses were approximately $31,468,000 and $35,380,000, respectively,
We expect to continue to incur significant expenses for the foreseeable future. We expect our expenses to continue to decline in 2022 as compared to 2021 due to the completion of our lenabasum clinical studies and a reduction in personnel. We do not plan to conduct additional clinical studies for lenabasum. While we expect expenses to decline in 2022, we will still incur significant operating losses and accordingly we will need additional financing to support our continuing operations. We will seek to fund our operations through public or private equity or debt financings or other sources, which may include government grants and collaborations with third parties. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenues to achieve profitability, and we may never do so.
We expect to continue to incur operating losses for at least the next several years in connection with our ongoing activities, as we:
-26-
Revenue Recognition
To date, we have not generated any revenues from the sales of products. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for the marketing of lenabasum or other of our product candidates, which we expect will take a number of years and is subject to significant uncertainty.
We have not recognized revenue in the three and nine months ended September 30, 2022, respectively. In the three and nine months ended September 30, 2021, we recognized approximately $97,000 and $882,000 of revenue, respectively.
Amounts recognized in revenue for the nine months ended September 30, 2021 were in connection with our entry on January 26, 2018 into the Cystic Fibrosis Program Related Investment Agreement (“Investment Agreement") with the Cystic Fibrosis Foundation (“CFF”), a non-profit drug discovery and development corporation, pursuant to which we received a development award for up to $25,000,000 in funding (the “2018 CFF Award”) to support a Phase 2b Clinical Trial (the “Phase 2b Clinical Trial”) of lenabasum in patients with cystic fibrosis of which we received $6,250,000 in the first quarter of 2018, $6,250,000 in the second quarter of 2018, $5,000,000 in the second quarter of 2019, $5,000,000 in the third quarter of 2020, and $2,500,000 in the fourth quarter of 2021, upon our achievement of a milestone related to the progress of the Phase 2b Clinical Trial, as set forth in the Investment Agreement. We received the entire $25 million from the CFF and have recorded a total of $25 million in revenue to date. We will not be recognizing revenue in the future from the 2018 CFF award.
-27-
Results of Operations
Comparison of Three Months Ended September 30, 2022 and 2021
Revenue
To date, we have not generated any revenues from the sales of products. We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for the marketing of lenabasum or other of our product candidates, which we expect will take a number of years and is subject to significant uncertainty.
We have recognized approximately $0 and $97,000 of revenue in the three months ended September 30, 2022 and 2021, respectively.
Amounts recognized in revenue for the three months ended September 30, 2021 were in connection with our entry on January 26, 2018 into the Cystic Fibrosis Program Related Investment Agreement (“Investment Agreement) with the Cystic Fibrosis Foundation (“CFF”), a non-profit drug discovery and development corporation, pursuant to which we received a development award for up to $25 million in funding (the “2018 CFF Award”) to support a Phase 2b Clinical Trial (the “Phase 2b Clinical Trial”) of lenabasum in patients with cystic fibrosis of which we received $6.25 million in the first quarter of 2018, $6.25 million in the second quarter of 2018, $5.0 million in the second quarter of 2019, $5.0 million in the third quarter of 2020, and $2.5 million in the fourth quarter of 2021 upon our achievement of a milestone related to the progress of the Phase 2b Clinical Trial, as set forth in the Investment Agreement. We received the entire $25 million from the CFF and have recorded a total of $25 million in revenue to date. We will not be recognizing revenue in the future from the 2018 CFF award.
Research and Development. Research and development expenses for the three months ended September 30, 2022 totaled approximately $4,108,000, a decrease of $4,588,000 from the $8,696,000 recorded for the three months ended September 30, 2021. The decrease in fiscal quarter 2022 as compared to 2021 was primarily attributable to decreases of $2,247,000 in compensation costs, $966,000 in consulting costs, and lower clinical expenses of approximately $671,000 all associated with the end of lenabasum clinical studies and a corresponding reduction in headcount.
During 2018, the Company formed a subsidiary in each of the United Kingdom and Australia and approximately 48% and 23% of research and development expenses recorded for the three months ended September 30, 2022 and 2021, respectively was recorded in these entities.
General and Administrative. General and Administrative expense for the three months ended September 30, 2022 totaled approximately $4,073,000, a decrease of $1,204,000 from the $5,277,000 recorded for the three months ended September 30, 2021. The decrease in fiscal 2022 as compared to fiscal 2021 was primarily attributable to decreases in compensation costs of $734,000 driven by reductions in headcount as the company transitioned to the pre-clinical phase and needed less support staff, as well as impairment losses of $226,000 as a result of the sublease agreement.
Other Income (Expense), Net. Other expense, net for the three months ended September 30, 2022 was approximately $600,000 as compared to other income of approximately $11,699,000 recorded for the three months ended September 30, 2021. The decrease of $12,299,000 in 2022 as compared to 2021 was primarily attributable to the receipt of approximately $12,300,000 from a foreign tax authority for refundable research and development credits in 2021. The current year refundable research and development credits are expected in Q4 2022.
-28-
Comparison of Nine Months Ended September 30, 2022 and 2021
Revenue
We had recognized $0 and $882,000 in revenue for the nine months ended September 30, 2022 and 2021.
Research and Development. Research and development expenses for the nine months ended September 30, 2022 totaled approximately $9,894,000, a decrease of $20,788,000 from the $30,682,000 recorded for the nine months ended September 30, 2021. The decrease in fiscal 2022 as compared to fiscal 2021 was primarily attributable to lower clinical expenses of approximately $7,721,000, as well as decreases of $6,934,000 in compensation costs, $1,768,000 in consulting costs, and $1,156,000 in data analysis costs all associated with the end of lenabasum clinical studies and a corresponding reduction in headcount. There was also a decrease of $2,269,000 in the upfront payments made to in-license integrin drugs.
During 2018, the Company formed a subsidiary in each of the United Kingdom and Australia and approximately 36% and 25% of research and development expenses recorded for the nine months ended September 30, 2022 and 2021, respectively was recorded in these entities.
General and Administrative. General and Administrative expense for the nine months ended September 30, 2022 totaled approximately $14,145,000, a decrease of $2,046,000 from the $16,191,000 recorded for the nine months ended September 30, 2021. The decrease in fiscal 2022 as compared to fiscal 2021 was primarily attributable to decreases in compensation costs of $2,183,000 driven by reductions in headcount as the company transitioned to the pre-clinical phase and needed less support staff.
Litigation Settlement. Litigation Settlement expense for the nine months ended September 30, 2022 totaled $5,000,000 as a result of the settlement with Venn Therapeutics, LLC. There was no litigation settlement for the nine months ended September 30, 2021.
Other Income (Expense), Net. Other expense, net for the nine months ended September 30, 2022 was approximately $2,429,000 as compared to approximately other income of $10,611,000 recorded for the nine months ended September 30, 2021. The decrease of $13,040,000 in 2022 as compared to 2021 was primarily attributable to the receipt of approximately $12,300,000 from a foreign tax authority for refundable research and development credits in 2021. The current year refundable research and development credits are expected in Q4 2022.
Liquidity and Capital Resources
Since inception, we have experienced negative cash flows from operations. We have financed our operations primarily through sales of equity-related securities. In addition, the majority of the costs of the SLE clinical trial has been or is expected to be funded by NIH grants and our phase 2b clinical trial in cystic fibrosis was supported by the 2018 CFF Award. At September 30, 2022, our accumulated deficit since inception was approximately $381,202,000.
At September 30, 2022, we had total current assets of approximately $67,348,000 and current liabilities of approximately $17,469,000, resulting in working capital of approximately $49,879,000. Of our total cash, cash equivalents, investments, and restricted cash of $66.9 million at September 30, 2022, approximately $64.1 million was held within the United States.
Net cash used in operating activities for the nine months ended September 30, 2022 was approximately $30,089,000, which includes a net loss of approximately $31,468,000, adjusted for non-cash expenses of approximately $7,365,000 largely related to stock-based compensation expense, and approximately $5,987,000 of cash used by net working capital items principally due to paying down accounts payable and accrued expenses.
Cash provided by investing activities for the nine months ended September 30, 2022 totaled approximately $18,294,000, which was principally related to sales and purchases of marketable securities.
Cash used in financing activities for the nine months ended September 30, 2022 totaled approximately $768,000, which was related to the repayment of short-term borrowings.
-29-
Under current SEC regulations, if at any time our public float is less than $75.0 million, and for so long as our public float remains less than $75.0 million, the amount we can raise through primary public offerings of securities in any twelve-month period using shelf registration statements is limited to an aggregate of one-third of our public float, which is referred to as the baby shelf rules. As of March 8, 2022, at the time of the filing of our Annual Report on Form 10-K for the year ended December 31, 2021, our calculated public float was below $75.0 million and we will be subject to baby shelf rules for any offerings conducted on our shelf registration statement. As of November 8, 2022, the date of the filing of this Quarterly Report on Form 10-Q, the aggregate market value of our outstanding common stock held by non-affiliates, or the public float, was $27.4 million, which was calculated based on 124,855,879 shares of our outstanding common stock held by non-affiliates at a price of $0.22 per share, the closing price of our common stock on September 13, 2022. As such, we will be restricted from selling more than $9.1 million of securities pursuant to a shelf registration statement in any twelve-month period, so long as the aggregate market value of our common stock held by non-affiliates is less than $75.0 million.
We expect our cash, cash equivalents, and marketable securities of approximately $66.2 million at September 30, 2022 will be sufficient to meet our operating and capital requirements through the second quarter of 2024, based on current planned expenditures.
We will need to raise significant additional capital to continue to fund operations and the discovery and pre-clinical costs for our product candidates. If we are unable to raise sufficient capital in the future, we may be required to undertake cost-cutting measures, including delaying or discontinuing certain clinical activities. We may seek to sell common stock, preferred stock or convertible debt securities, enter into a credit facility or another form of third-party funding or seek other debt financing. In addition, we may seek to raise cash through collaborative agreements or from government grants. The sale of equity and convertible debt securities may result in dilution to our stockholders and certain of those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of preferred stock, convertible debt securities or other debt financing, these securities or other debt could contain covenants that would restrict our operations. Any other third-party funding arrangement could require us to relinquish valuable rights.
The source, timing and availability of any future financing will depend principally upon market conditions, and, more specifically, on the progress of our clinical development programs.
Funding may not be available when needed, at all, or on terms acceptable to us. Lack of necessary funds may require us, among other things, to delay, scale back or eliminate expenses including some or all of our planned clinical trials.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors, other than future royalty payments under development award agreements discussed as follows:
-30-
License Agreement with Jenrin
Pursuant to the terms of the Jenrin Agreement, we are obligated to pay potential milestone payments to Jenrin totaling up to $18.4 million for each compound we elect to develop based upon the achievement of specified development and regulatory milestones. In addition, we are obligated to pay Jenrin royalties in the mid, single digits based on net sales of any Licensed Products, as defined in the Jenrin Agreement, subject to specified reductions.
The Jenrin Agreement terminates on a country-by-country basis and product-by-product basis upon the expiration of the royalty term for such product in such country. Each royalty term begins on the date of the first commercial sale of the licensed product in the applicable country and ends on the later of seven years from such first commercial sale or the expiration of the last to expire of the applicable patents in that country. The Jenrin Agreement may be terminated earlier in specified situations, including termination for uncured material breach of the Jenrin Agreement by either party, termination by Jenrin in specified circumstances, termination by Corbus with advance notice and termination upon a party’s insolvency or bankruptcy.
License Agreement with Milky Way
Pursuant to the terms of the Milky Way Agreement, we are obligated to pay potential milestone payments to Milky Way totaling up to $53.0 million based upon the achievement of specified development and regulatory milestones. In addition, we are obligated to pay Milky Way royalties in the lower, single digits based on net sales of any Licensed Products, as defined in the Milky Way Agreement.
The Milky Way Agreement will remain in effect on a Licensed Product-by-License Product and country-by-country basis, until the expiration of the Royalty Term of the Licensed Product in the country. The "Royalty Term" means the period beginning from the First Commercial Sale of the Licensed Product in the country until the expiration of the last-to-expire Valid Claim in any Licensor Patent in the country that Covers the composition of matter of the Licensed product, the manufacture of the Licensed Product in the country, or a method of use of the Licensed Product for an indication for which Regulatory Approval has been obtained in the country. The Milky Way Agreement may be terminated earlier in specified situations, including termination for material breach or termination by Corbus with advance notice.
License Agreement with UCSF
Pursuant to the terms of the UCSF Agreement, we are obligated to pay potential milestone payments to UCSF totaling up to $153.0 million based upon the achievement of specified development and regulatory milestones. In addition, we are obligated to pay UCSF royalties in the lower, single digits based on net sales of any Licensed Products, as defined in the UCSF Agreement.
The UCSF Agreement will remain in effect until the expiration or abandonment of the last of the Patent Rights licensed. The Royalty Term is the duration of Patent Rights in that country covering the applicable Licensed Product or Licensed Services Sold in the country. The UCSF Agreement may be terminated earlier in specified situations, including termination for material breach, termination by Corbus with advance notice and termination upon a party's bankruptcy.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates, assumptions, and judgements that affect the reported amounts of assets, liabilities, revenue, costs of expenses and related disclosures in the condensed consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments. We base our estimates and judgments on historical experience, current economic and industry conditions and on various other factors that are believed to be reasonable under the circumstances. This forms the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe our critical accounting policies that involve the most judgement and complexity are those relating to:
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stock based compensation; |
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accrued research and development expenses; and |
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right of use assets and lease liabilities; |
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Stock-Based Compensation
Stock options are granted with an exercise price at no less than fair market value at the date of the grant. The stock options normally expire ten years from the date of grant. Stock option awards vest upon terms determined by our Board.
We recognize compensation costs resulting from the issuance of stock-based awards to employees, members of our Board and consultants. The fair value of each option grant was estimated as of the date of grant using the Black-Scholes option-pricing model. The fair value is amortized as compensation cost on a straight-line basis over the requisite service period of the awards, which is generally the vesting period. We estimate volatility by analyzing the volatility of the trading price of our common stock. We use historical data, as well as subsequent events occurring prior to the issuance of the consolidated financial statements, to estimate option exercise and employee forfeitures within the valuation model. The expected term of options granted to employees under our stock plans is based on the average of the contractual term (generally 10 years) and the vesting period (generally 48 months). The expected term of options granted under the 2014 Plan, all of which qualify as “plain vanilla” per SEC Staff Accounting Bulletin 107, is based on the average of the 6.25 years. For non-employee options, the expected term is the contractual term. The risk-free rate is based on the yield of a U.S. Treasury security with a term consistent with the option. We estimate the forfeiture rate at the time of grant and revise it, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Forfeitures were estimated based on management’s expectation through industry knowledge and historical data. We have never paid dividends on our common stock and do not anticipate paying dividends on our common stock in the foreseeable future. Accordingly, we have assumed no dividend yield for purposes of estimating the fair value of our share-based compensation.
Accrued Research and Development Expenses
As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which are research and development expenses. This process involves: communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of actual cost; estimating and accruing expenses in our financial statements as of each balance sheet date based on facts and circumstances known to us at the time; and periodically confirming the accuracy of our estimates with selected service providers and making adjustments, if necessary.
Examples of estimated research and development expenses that we accrue include:
We base our expense accruals related to clinical studies on our estimates of the services performed pursuant to contracts with multiple research institutions and clinical research organizations that conduct and manage clinical studies on our behalf. The financial terms of these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts depend on factors, such as the successful enrollment of patients and the completion of clinical study milestones. Our service providers invoice us monthly in arrears for services performed. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of these services, our actual expenses could differ from our estimates.
To date, we have not experienced significant changes in our estimates of accrued research and development expenses following each applicable reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the future as we become aware of additional information regarding the status or conduct of our clinical studies and other research activities.
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Leases
We lease our office space. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities, current and noncurrent in our consolidated balance sheets.
ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As our leases do not provide an implicit rate, we use an incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. This is the rate we would have to pay if borrowing on a collateralized basis over a similar term to each lease. The ROU asset also includes any lease payments made and excludes lease incentives. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
The Company has subleased a portion of its leased facility under an agreement considered to be an operating lease according to GAAP. The Company has not been legally released from its primary obligations under the original lease and therefore it continues to account for the original lease as it did before commencement of the sublease. The Company will record both fixed and variable payments received from the sublessee in its statement of operations on a straight-line basis as an offset to rent expense.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Evaluation of Our Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to provide reasonable assurance that material information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, our principal executive officer and our principal financial officer, to allow timely decisions regarding required disclosure. Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act, as amended) as of the end of the period covered by this report. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report were effective in ensuring that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that the information required to be disclosed by us in such reports is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) that occurred during the period to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings.
On May 12, 2022, the Company entered into a binding term sheet (the “Settlement ”) with Venn Therapeutics, LLC, (“Venn”) to resolve the claims by Venn against the Company, its Chief Executive Officer, and a former employee which were previously disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2022.
Under the terms of the Settlement, the Company made a $5 million payment to Venn on May 26, 2022 and Venn dismissed with prejudice all claims against the Company, its Chief Executive Officer and a former employee.
Item 1A. Risk Factors.
There have been no material changes in or additions to the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2021 and as updated by our Form 8-K filed on July 6, 2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
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Item 6. Exhibits.
The exhibits listed below are filed or furnished as part of this Quarterly Report on Form 10-Q.
EXHIBIT INDEX
Exhibit No. |
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Description |
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31.1 |
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Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).* |
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31.2 |
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Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a).* |
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32.1 |
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Certification of Chief Executive Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b).** |
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32.2 |
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Certification of Chief Financial Officer pursuant to Rule 13a-14(b) or Rule 15d-14(b).** |
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101.INS |
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Inline XBRL Instance Document.* - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document.* |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document.* |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document.* |
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101.LAB |
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Inline XBRL Taxonomy Extension Label Linkbase Document.* |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document.* |
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104 |
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The cover page from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2022 is formatted in iXBRL* |
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Filed herewith. |
** |
Furnished, not filed. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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Corbus Pharmaceuticals Holdings, Inc. |
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Date: November 8, 2022 |
By: |
/s/ Yuval Cohen |
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Name: |
Yuval Cohen |
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Title: |
Chief Executive Officer |
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(Principal Executive Officer) |
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Date: November 8, 2022 |
By: |
/s/ Sean Moran |
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Name: |
Sean Moran |
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Title: |
Chief Financial Officer |
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(Principal Financial Officer and Chief Accounting Officer) |
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