I have plans to initiate a position in regard to stocks mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
Curis (NASDAQ: CRIS) is small cap oncology-focused biotech company developing novel drug candidates for the treatment of human cancers that is currently going through a period of unpopularity by the market which has been overdone.
For example in November 2013 Curis were banned by the FDA from testing an experimental cancer drug after the death of a patient during early stage trials.
More can be read on that story by clicking here.
The ban was lifted on 31 March 2014 and Curis resumed testing.
Curis 5 Year Price Chart
Chart courtesy of Yahoo! Finance
The ban weakened Curis’ pipeline somewhat due to Curis’ narrow focus but it has significantly improved since the first quarter of 2014; Curis have a collaboration agreement with Roche and Genentech to develop and commercialize Erivedge and in June 2014 Roche filed an Investigational New Drug (IND) application with the U.S. Food and Drug Administration (FDA) to initiate a multicenter, Phase 2 clinical study of Erivedge to treat lung disease.
This is good news since they can expand the use of an already commercialised product to a wider customer base if testing all goes well.
Curis Pipeline As At August 2014
The Balance Sheet
In December 2012 Curis Royality (a wholly owned subsidiary) entered into a loan agreement with BioPharma Secured Debt Fund II Sub, S.à r.l., a Luxembourg limited liability company (investment fund) managed by Pharmakon Advisors.
The loan was for $30 million at a 12.25% interest rate.
Commenting at the time the then CEO Dan Passeri stated that he planned “...to deploy this important non-dilutive capital to further advance our proprietary development programs” and to “significantly strengthen our capital position“.
In any event the terms of the loan state that Curis transferred the right to Curis Royalty “the right to receive royalty and certain other royalty-related payments from the commercial sales of Erivedge under Curis’ collaboration agreement with Genentech. The royalty payments that Curis Royalty will be entitled to receive under the collaboration agreement with Genentech will be the source of funds to repay principal of and interest on the loan…”
As of the last quarterly report there is $26 million still left on the loan.
With a current ratio of 7.69 and a total debt to equity ratio of 0.68 the cash position of Curis ensures relative balance sheet safety although it is not ideal but you can’t have everything.
As this is a new position to The Value Investor Portfolio, I’ll be monitoring not only how well Curis maintains it’s balance sheet strength but also how robust the pipeline is both in terms of development and commercialisation but the bottom line is that this company has excellent potential moving forward as a going concern and has already proven that it can commercialise.
Long today at $1.81, 5% position size.