Leave a comment and click here to sub for MS Equity Analysis and Swing Moves.
You may have recently seen hype about Corbus Pharmaceuticals (Nasdaq: CRBP), because Cramer from CNN mentioned CRBP in one of his recent Mad Money broadcasts. Whether you’ve been watching CRBP for a long while, or your interest has just been piqued, keep reading. I hope to lay out some facts about CRBP that you can use as you do your due diligence (DD) on this company.
Who are they?
“…is a Phase 3 clinical-stage pharmaceutical company focused on the development and commercialization of novel therapeutics to treat inflammatory and fibrotic diseases by leveraging its industry leading pipeline of endocannabinoid system-targeting drug candidates.”From Corbus website
Based in Norwood, MA Corbus is taking a truly unique approach to resolving autoimmune and genetically derived fibrotic diseases. Importantly, their novel compounds have relatively minor side-effects such as dry mouth and fatigue compared to industry standard immunosuppressive drugs that have high toxicities. Presently Corbus has a market cap of $413.3 million and traded last at $7.22.
What is the endocannabinoid system?
Alright, you may be thinking, “Endocannabinoid? That sounds a lot like cannabis! Is this a cannabis company?” A great question. The answer, is no. Corbus develops drugs that target the endocannabinoid system in humans. Endocannabinoids are endogenous lipid-based retrograde neurotransmitters that bind to cannabinoid receptors, and cannabinoid receptor proteins, that are expressed in the central and peripheral nervous system. Endocannabinoids are produced naturally in the body, as indicated by “endo”, a prefix from the Greek word “endon”, meaning “within, inner, absorbing, or containing”.
Cannabinoids, on the other hand, are one class of diverse chemical compounds that act on those same cannabinoid receptors throughout the body, and cannabinoids (at least 113 different ones) have been isolated from the plant, cannabis. Two of the most widely known cannabinoids are THC and CBD. They are organic compounds that connect to receptors in our cells on the molecular level. Two of these receptors are called CB1 and CB2. Think of the receptors like keyholes, and the cannabinoids like keys that, when inserted into the keyholes, unlock a connection between the CB1 and CB2 receptors. The cannabinoids act like a chemical message delivery system.
Corbus focuses on the development and commercialization of novel therapeutics to treat inflammatory and fibrotic diseases through its pipeline of endocannabinoid system-targeting drug candidates. Their pipeline is built on the underlying science of the endocannabinoid system as a master regulator of inflammation and fibrosis in the body.
Lenabasum is being evaluated in these studies:
- Phase 3 of RESOLVE-1 study for Diffuse Cutaneous Systemic Sclerosis.
- 354 patients at 60 sites in North America, Europe, Australia, and Asia
- RESOLVE-1 has an estimated Primary Completion Date of March 2020
- Phase 3 of DETERMINE study for Dermatomyositis
- 150 patients at about 60 sites in North America, Europe, and Asia
- DETERMINE has an estimated Primary Completion Date of December 2021
- Phase 2 of study for Systemic Lupus Erythematosus (SLE)
- Conducted by the Autoimmunity Centers of Excellence (ACE) program
- About 100 SLE patients at 15 sites in the United States
- Primary Completion Date is February 2020
- Phase Phase 2 Study in Systemic Lupus Erythematosus2b of study for Cystic Fibrosis
- 415 patients at about 100 sites in North America, Europe, and Australia
- Estimated Primary Completion Date is September 2019
CRB-4001 is Corbus’ second major drug candidate. It is a 2nd generation, peripherally-restricted, CB1 inverse agonist. In September 2018, Corbus licensed the exclusive worldwide rights to develop, manufacture and market drug candidates from more than 600 novel compounds targeting the endocannabinoid system from Jenrin Discovery, LLC. The pipeline includes CRB-4001.
CRB-4001 was developed in collaboration with the National Institutes of Health (NIH). CRB-4001 was specifically designed to eliminate blood-brain barrier penetration and brain CB1 receptor occupancy that mediate the neuropsychiatric issues associated with first-generation CB1 inverse agonists such as rimonabant.
George Kunos, MD, PhD, who joined the Company’s Scientific Advisory Board as part of the transaction with Jenrin Discovery, LLC., led the work at the NIH to advance CRB-4001 to clinical testing. A Phase 1 safety study for CRB-4001 is planned in 2019. Following the Phase 1 safety study, Dr. Kunos plans to coordinate a NIH-funded first-in-patient Phase 2 study.
As of their 10Q filing for the quarter ended September 30th, 2018 Corbus held $55.6 million in cash. In that same filing they stated: “The Company expects the cash and cash equivalents of $55,659,346 at September 30, 2018 to be insufficient to meet its operating and capital requirements at least 12 months from the filing of this 10-Q.” But, this is the Biotech world. Shortage of cash is seemingly always an issue. The question is, is there significant interest in the company from investors who would buy shares if an offering took place?
We have a recent answer to that question, as Corbus just announced the closing of its public offering of 6,198,500 shares of its common stock, including some shares sold pursuant to the full exercise of the underwriters’ option to purchase additional shares. All shares sold at a public offering price of $6.50 per share. This generated approximately $40 million in cash, less the underwriting discounts and offering expenses.
Total liabilities were $18.3 million as of the September 2018 10Q filing.
My stance is that Corbus is decently healthy financially, as evidenced by their balance sheet and recent investor receptivity to their stock offering. Of course, one caution to investors looking to initiate a position in CRBP is the possibility of future dilution through public offerings.
In total, there is a $5 billion annual market opportunity CRBP could capture. Systemic Sclerosis (SSc) and Dermatomyostis (DM) have annual market potentials of $1.4-$2.2 billion and $1.0-$2.0 billion respectively, in the U.S and Japan. As referenced above, Lenabasum is undergoing phase 3 trials for both of these indications with expected completion dates in the next two years. A commercial launch is anticipated by 2021. It’s crucial to realize autoimmune and fibrotic diseases are largely considered unmet medical needs. In the past, anti-inflammatory drugs have proven lucrative. Rituxan commercialized by Roche (OTCMKTS: RHHBY) in 1997 pulled in $9.0 billion in worldwide sales in 2017. Humira by AbbVie (NYSE: ABBV) and approved in 2002 generated a staggering $18 billion in 2017. Lupus and Cystic Fibrosis (CF) are also substantial potential earners for CRBP with market potentials of $2-$3 billion and $.7-$1.0 billion respectively.
The industry standard treatment for SSc and DM is immunosuppressive drugs. They all carry serious risk of infections and require regular blood tests while patients are being treated. Lenabasum is not an immunosupressant and has demonstrated a favorable safety profile in clinical trials. With regards to SSc, DM, and CF there are no drugs approved specifically targeting these indications. Furthermore, there have been no serious adverse events related to Lenabasum. Instead of suppressing the body’s immune function to combat inflammation, Lenabasum inhibits the production of mediators derived from epithelial and connective tissue cells while promoting wound healing. These indications have not gone unnoticed by big pharma. Several phase 3 and phase 2 clinical trials by companies like Roche, Bayer (OTCMKTS: BAYRY), and Idera Pharmaceuticals (Nasdaq: IDRA) have targeted them but came up short, missing pivotal primary end-points. Some companies remain in the running but are behind CRBP in the clinical development process. This gives Corbus an advantage and the potential to be first-to-market with a novel drug specifically designed to address SSc, DM, and CF, and be superior to immunosuppressive options.
How’s their Management?
I’m a big fan of Warren Buffett. I’ve read his annual Berkshire Hathaway shareholder letters back to 1980. They’re filled with nuggets of wisdom about investing, capital allocation, and life in general. I think a man who has compounded his company’s capital annually at 20.9% in the period from 1965-2017 has earned our listening hear, don’t you?
One of Warren Buffett’s four “Pillars of Investing” is the quality of the subject company’s management. If they have not proven themselves capable, he will not touch the stock. They have to be vigilant for him to be interested in the stock. Alright, after that free lesson about Buffett, how does Corbus’ management stack up?
Yuval Cohen, Ph.D. has been in the CEO position for almost six years. Prior to Corbus, Dr. Cohen was President and co-founder of Celsus Therapeutics from 2005-2013. During this time, Celsus focused on developing five anti-inflammatory drug programs targeting allergies and autoimmune diseases. He lead their group through the different stages of pre-clinical and clinical development, and managed their interactions with regulatory bodies and the investment community. In 2013 he completed the public listing of Celsus Therapeutics in the United States.
Mark A. Tepper, Ph.D. founded Corbus in 2009. He is the President and Chief Scientific Officer for the Company. He has held various leadership positions in pharmaceutical companies such as Bristol Myers Squibb, Serono, CytRx, RXi Pharmaceuticals, and NKT Therapeutics. He has recently focused on identifying unique early stage biotechnological assets, particularly ones that target unmet medical needs. He has successfully founded and developed commercialization strategies for three new biotech companies.
Barbara White, MD has been CMO of Corbus since 201. Her industry experience includes Phase 1-4 clinical development in inflammatory and autoimmune diseases including rheumatology, respiratory, and dermatology diseases. She has held positions at University of California, Berkley, MedImmune, Amgen, and the Johns Hopkins University and University of Maryland Scleroderma Center.
Sean Moran has been CFO of Corbus since 2014. He has more than 20 years of experience leading biotech companies, and has lead operations from start up through commercialization to profitability. He has completed three IPOs and raised over $200 million of capital. Before Corbus, Moran was CFO of InVivo Therapeutics, Celsion Corporation, Echo Therapeutics, and Anika Therapeutics.
Corbus’ leadership has a stellar track record, and extensive experience in their respective fields.
Corbus Pharmaceuticals is a company with a promising drug pipeline, a decent balance sheet, and experienced leadership. They are targeting several inflammation and fibrosis diseases with their novel endocannabinoid system-targeting drug candidates. Moreover, they have a significant market opportunity up for the takings in SSc, DM, CF, and Lupus. Thus far they have some of, if the not the most, advanced clinical trials in these indications. Based on Lenabasum’s MOA and safety profile it could easily become a preferred treatment option. Are they a good buy? Given their trajectory and information discussed I think so, which I why I’ve opened a small initial position on CRBP. I’m generally a long-term investor, and this is the case with CRBP. I think a 2+ year hold on this stock will generate significant returns. For those surprised by the 2+ year time frame, be reminded of the words of investing sage, Warren Buffett:
“The stock market is a device to transfer money from the impatient to the patient.”
I am long CRBP.
MS Money Moves and it’s Chief Operating Officer who is a scientist and individual investor, as well as its affiliates are not registered financial advisors. Our posts should serve as educational material to help you conduct due diligence research. Posts and articles are not directives or recommendations to invest in any security. We reserve the right to buy or sell any security for ourselves without any notification except when required by law. We are not responsible for the action of our affiliates. Investment theses may change due to the variable nature of the securities market. Because of this there is great risk when investing in stocks and options which can result is capital loss. Additionally, past performance by MS Money Moves or any security is not a predictor of future performance. Everyone should conduct their own research and due diligence before making an investment decision. We recommend you consult a financial advisor regarding any investment action.
The biotech sector is especially volatile. Stock prices may fluctuate substantially based on material or nonmaterial developments. We encourage everyone to familiarize themselves with clinical trial processes, relevant terminology, FDA/SEC rules and regulations, and the general processes of drug & therapy development/approval. Always do independent research in a security prior to investing.