Here is a recent price chart of Curis (NASDAQ: CRIS) indicating where I purchased stock:
Since I opened a position at $1.81 on 5 August 2014, at the exited share price of $3.33 Curis’ share price rose just under 84% in 7 months.
But like my recent review of another stock from The Value Investor Report I failed to wait for the stock price to fall to multi-year lows before purchasing a position: Curis’ stock price went down 38% to $1.12 soon after I bought stock.
To the numbers (and the reasons why I’ve dumped this stock)…
From the 7 August 2014 10Q:
The two things that jump out are that revenue is decreasing and that Curis is still loss making.
It was the same story in the 30 September 2014 quarterly report:
What’s shocking here is the drastic reduction in total revenues leading to yet another quarterly loss.
There is a similar slow, grinding deterioration in earnings and on the balance sheet for the latest year end figures made public on 24 February 2015:
The Curis year end balance sheet
In a nutshell for the year ended December 31, 2014, Curis reported a net loss of $18.7 million, or ($0.22) per basic and fully diluted share, as compared to a net loss of $12.3 million or ($0.15) per basic and fully diluted share in 2013.
For the fourth quarter of 2014, Curis reported a net loss of $5.7 million, or ($0.07) per basic and fully diluted share, as compared to a net loss of $4.2 million or ($0.05) per basic and fully diluted share for the same period in 2013.
The decrease in revenues for the year ended December 31, 2014 was primarily due to a decrease in license fee revenues from Genentech of $7 million when compared to the year ending 2013. This decrease was partially offset by an increase in royalty revenues, which were $6.8 million and $3.9 million for the years ending 2014 and 2013, respectively.
For the year ended 2013, Curis also recorded $650,000 in research and development revenues for milestone payments received from The Leukemia and Lymphoma Society (LLS)
The only positive news that Curis have trumpeted is a collaboration with Aurigene Discovery Technologies Ltd on 21 January 2015 to discover, develop and commercialize drugs for the treatment of human cancer with Curis having the option to exclusively license compounds once a development candidate is nominated within each respective program.
Beginning with two such programs, Curis expects to exercise its option to obtain exclusive licenses to both programs and file IND applications for a development candidate from each in 2015.
we believe that this collaboration represents a true transformation for Curis that positions the company for continued growth in the development and eventual commercialisation of cancer drugs
Ali Fattaey, Ph.D., President and Chief Executive Officer of Curis
Interestingly Curis has agreed to make payments to Aurigene for the first two programs: up to $52.5 million per program, including $42.5 million per program for approval and commercial milestones, plus specified approval milestone payments for additional indications.
There are a further two programs in the pipeline with similar payment terms as well as royalties payable to Aurigene from net sales of up to 10%.
This particular news appears to be responsible for the share price run up beginning in January until now which confuses the hell out of me considering that the numbers over the last two quarters have been deteriorating.
Is the investing public that fickle that any news with a slight positive spin is enough to propel a share price advance from $1.68 on 22 January to $3.16 at the close on 5 March 2015 – an 88% increase.
I guess they like weaker balance sheets and earnings invisibility. For example just how or when will this new collaboration turn into positive earnings?
At today’s share price Curis has a market cap of $343 million and the question I asked myself is: would I pay $343 million for a business that has never posted positive earnings.
The fact that commercialisation will start at some point in 2015 was simply not enough of an incentive for me to keep hold of the shares but at the same time Curis is worth watching because when they do successfully commercialise then a further price advance is likely.
For now a lack of earnings visibility made me not want to hold onto this stock and let’s remember why I purchased this stock in the first place: a negative news story that the market had used to punish the stock unfairly.
I think the market has more than caught up with reality (value) here but has again become overconfident on earnings prospects.
As always I could be completely wrong but an 84% profit seems fair at this stage.
Out at $3.33.