Nature of Business

Curis, Inc. is a biotechnology company focused on the development of first-in-class and innovative therapeutics for the treatment of cancer. Throughout these Condensed Consolidated Financial Statements, Curis, Inc. and its wholly owned subsidiaries are collectively referred to as “the Company,” or “Curis.”

The Company conducts its research and development programs both internally and through strategic collaborations. The Company’s clinical stage drug candidates are CA-4948, CI-8993, and fimepinostat:

•

CA-4948 which is being tested in a Phase 1 dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with Myeloid Differentiation Primary Response 88 (“MYD88”), alterations. The Company reported preliminary clinical data from the study in December 2019. The Company is starting a separate Phase 1 trial for acute myeloid leukemia and myelodysplastic syndromes and anticipates the first patient enrolling in the second quarter of 2020.


•	CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation (“VISTA”) signaling pathway, which the Company plans to begin clinical testing in a Phase 1a/1b trial in the second half of 2020.

•

Fimepinostat, which is currently being explored in clinical studies in patients with MYC-altered diffuse large B-cell lymphoma (“DLBCL”) and solid tumors and has been granted Orphan Drug Designation and Fast Track Designation for the treatment of DLBCL by the U.S. Food and Drug Administration, (”FDA”) in April 2015 and May 2018, respectively. The Company began enrollment in a Phase 1 combination study with venetoclax in DLBCL patients, including patients with translocations in both MYC and the BCL2 gene, also referred to as double-hit lymphoma, or high-grade B-cell lymphoma (“HGBL”). The Company reported preliminary clinical data from this combination study in December 2019. In March 2020, the Company announced that although it observed no significant drug-drug interaction in its Phase 1 study of fimepinostat in combination with venetoclax, the Company did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. The Company is currently evaluating future studies for fimepinostat.

The Company's pipeline includes CA-170, for which the Company announced initial data from a clinical study in patients with mesothelioma, in conjunction with the Society of lmmunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. The Company is currently evaluating future studies for CA-170.

The Company’s pipeline also includes CA-327, which is a pre-Investigational New Drug (“IND”) stage oncology drug candidate.

The Company is party to a collaboration with Genentech Inc. (“Genentech”), a member of the Roche Group, under which F. Hoffmann-La Roche Ltd (“Roche”) and Genentech are commercializing Erivedge® (vismodegib), a first-in-class orally administered small molecule Hedgehog signaling pathway inhibitor. Erivedge is approved for the treatment of advanced basal cell carcinoma (“BCC”).

In January 2015, and as amended in September 2016 and February 2020, the Company entered into a collaboration, option and license agreement focused on immuno-oncology and selected precision oncology targets with Aurigene Discovery Technologies Limited (Aurigene).

The collaboration with Aurigene is comprised of multiple programs, and the Company had the option to exclusively license each program, including data, intellectual property and compounds associated therewith, once a development candidate is nominated within such program. In October 2015, the Company exercised options to license two programs under this collaboration. The first licensed program is in the immuno-oncology field and the Company has named CA-170, an orally available small molecule antagonist of two immune checkpoints, VISTA and programmed death ligand-1 (PDL1), as the development candidate from this program. The second licensed program is in the precision oncology field and the Company has named CA-4948, an orally available small molecule inhibitor of Interleukin-1 receptor-associated kinase 4 (IRAK4) as the development candidate. In October 2016, the Company exercised its option to license a third program in the collaboration, and designated CA-327, a distinct orally available small molecule antagonist of two immune checkpoints PDL1 and T-cell immunoglobulin and mucin domain containing protein-3 (TIM3) as the development candidate from this program. In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.

In January 2020, Curis entered into an option and license agreement with ImmuNext, Inc. Pursuant to the terms of the option and license agreement, the Company has the option, exercisable for a specified period as set forth in the option and license agreement, to obtain an exclusive license to develop and commercialize certain VISTA antagonizing compounds, including ImmuNext's lead compound, CI-8993, and products containing these compounds in the field of oncology.

The Company is subject to risks common to companies in the biotechnology industry as well as risks that are specific to the Company’s business, including, but not limited to: the Company’s ability to continue as a going concern; the Company’s ability to obtain adequate financing to fund its operations; the Company’s ability to advance and expand its research and development programs; the impacts of the COVID-19 pandemic and responsive actions related thereto; the Company’s reliance on Aurigene to successfully preclinically develop drug candidates under the parties’ collaboration agreement; the Company’s reliance on Roche and Genentech to successfully commercialize Erivedge in the approved indication of advanced BCC and to progress its clinical development in indications other than BCC; the ability of the Company and its wholly owned subsidiary, Curis Royalty, LLC (Curis Royalty) to satisfy the terms of the royalty interest purchase agreement (the Oberland Purchase Agreement) with TPC Investments I LP and TPC Investments II LP, referred to as the Purchasers, each of which is a Delaware limited partnership managed by Oberland Capital Management, LLC, and Lind SA LLC, referred to as the Agent, a Delaware limited liability company managed by Oberland Capital Management, LLC, as collateral agent for the Purchasers; the Company’s ability to obtain and maintain necessary intellectual property protection; development by the Company’s competitors of new or better technological innovations; the Company's dependence on key personnel; the Company’s ability to comply with regulatory requirements; the Company's ability to obtain and maintain applicable regulatory approvals and commercialize any approved product candidates: the Company’s ability to execute on its overall business strategies; and the Company’s ability to maintain its listing on the Nasdaq Global Stock Market.

The Company’s future operating results will largely depend on the progress of drug candidates currently in its development pipeline and the magnitude of payments that it may receive and make under its current and potential future collaborations. The results of the Company’s operations have varied and will likely continue to vary significantly from year to year and quarter to quarter and depend on a number of factors, including, but not limited to: the timing, outcome and cost of the Company’s preclinical studies and clinical trials for its drug candidates; Aurigene’s ability to successfully develop preclinical programs under the Company’s collaboration with Aurigene, as well as the Company’s ability to further develop programs under this collaboration; Roche and Genentech’s ability to successfully commercialize Erivedge; and positive results in Roche and Genentech’s ongoing clinical trials.

The Company has incurred net losses and negative cash flows from operations since its inception. As of March 31, 2020, the Company had an accumulated deficit of approximately $1.0 billion, and for the three months ended March 31, 2020, the Company incurred a net loss of $9.7 million and used $9.0 million of cash in operations. The Company expects to continue to generate operating losses in the foreseeable future. The Company anticipates that its $12.5 million of existing cash, cash equivalents and investments at March 31, 2020 should enable the Company to maintain its planned operations into the third quarter of 2020. Based on the Company's available cash resources, recurring losses and cash outflows from operations since inception, an expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to raise additional capital to finance its future operations, the Company concluded it does not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Quarterly Report on Form 10-Q. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to finance its operations through its common stock purchase agreement with Aspire Capital Fund LLC, or Aspire Capital, and its at-the-market sales agreement with JonesTrading Institutional Services LLC, or JonesTrading or other potential equity financings, debt financings or other capital sources. However, the Company may not be successful in securing additional financing on acceptable terms, or at all. Furthermore, high volatility in the capital markets resulting from the COVID-19 pandemic has had, and could continue to have, a negative impact on the price of the Company’s common stock, and could adversely impact the Company’s ability to raise additional funds. The Company’s ability to raise additional funds will depend, among other factors, on financial, economic and market conditions, many of which are outside of its control and it may be unable to raise financing when needed, or on terms favorable to the Company. If necessary funds are not available, the Company will have to delay, reduce the scope of, or eliminate some of its development programs, potentially delaying the time to market for or preventing the marketing of any of its product candidates.

In addition, in light of the Company’s limited cash resources, it may seek to engage in one or more strategic alternatives, such as a strategic partnership with one or more parties, the licensing, sale or divestiture of some of its assets or proprietary technologies or the sale of the Company, but there can be no assurance that the Company would be able to enter into such a transaction or transactions on a timely basis or on terms favorable to it, or at all.

COVID-19 Pandemic

In December 2019, an outbreak of respiratory illness caused by a strain of novel coronavirus, COVID-19, began in China. That outbreak has led to millions of confirmed cases worldwide, including in the Unites States and other countries where the Company is conducting clinical trials or activities in support thereof. The World Health Organization declared the outbreak a global public health emergency on January 30, 2020 and declared it a pandemic on March 11, 2020. In addition to those who have been directly affected, billions more have been affected by governmental efforts around the world to slow the spread of the outbreak. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce.

The Company has enrolled, and will seek to enroll, cancer patients in its clinical trials at sites located both in the United States and internationally, including in Germany. Many of the Company’s clinical trial sites have imposed restrictions on entry as a result of the COVID-19 pandemic, which may have a negative impact on the Company’s ability to conduct its clinical trials. We may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the outbreak. For example, all of the Company’s clinical trial sites for its ongoing Phase 1 clinical trial for CA-4948 in patients with non-Hodgkin lymphomas, including those with MYD88 alterations, are at large academic research hospitals that have imposed restrictions on entry which could potentially prohibit clinical trial monitors and patients from entering the trial sites. The Company is actively working with its CRO partners to follow FDA guidelines on performing remote monitoring to the extent possible and to arrange for the shipment of medicine directly from the clinical trial site to patients who are enrolled in its trials, if required; however, there is no assurance such arrangements will be successful. As a result, further enrollment in the Company’s ongoing clinical trial for CA-4948 in patients with non-Hodgkin lymphomas may be delayed and patients currently enrolled in the trial may cease treatment due to the restrictions described above or fear of visiting or inability to visit the Company’s trial sites. In addition, the Company does not currently know the duration or to what degree medical facilities, including the Company’s clinical trial sites, will continue to be impacted by the pandemic. As a result, enrollment in this trial has been slower than expected and the timeline of the Company’s ongoing clinical trial in CA-4948 may be delayed. In addition, the Company has not initiated enrollment for its planned Phase 1 clinical trial in CA-4948 in patients with acute myeloid leukemia and myelodysplastic syndromes. Clinical trial sites for this study may also impose restrictions similar to those described above. As a result, initiation of enrollment in this trial has been slower than expected and the Company may not be able to enroll this trial on its planned timeline, which would cause a delay in the overall timeline for this trial. Similarly, the Company has not initiated its planned Phase 1 clinical trial for CI-8993, and initiation and enrollment of this study may be delayed due to the factors discussed above.

The Company and its collaborators, third-party contract manufacturers, contract research organizations and clinical sites could experience delays or disruptions in supply of product candidates and/or procuring items that are essential for its research and development activities, including, for example, raw materials used in the manufacturing of its product candidates, basic medical and laboratory supplies used in its clinical trials or preclinical studies, or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the outbreak. Some of the Company’s product candidates, or materials contained therein, may come from facilities located in areas impacted by COVID-19, including India, China, and Europe. In addition, any disruptions could impact the supply, manufacturing or distribution of Erivedge, and sales of Erivedge may be negatively impacted by a decrease in new prescriptions as a result of a decline in patient medical visits due to the COVID-19 pandemic, which could negatively impact the amount and timing of any royalty revenue the Company may receive from Genentech related to Erivedge^®.

The Company is also experiencing delays in closing down its clinical trial sites related to its fimepinostat and CA-170 trials due to restrictions on non-essential workers imposed at those sites in response to COVID-19, which has delayed the winding down of these trials and may result in additional costs and expenses. In addition, the Company has been unable to relocate to its new headquarters. The Company expects to relocate to its new location in the second quarter of 2020, however, this timeline may change to the extent restrictions as a result of the pandemic continue. Additionally, the pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact the Company’s ability to raise additional funds. The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business and the pandemic has the potential to adversely affect the Company’s business, financial condition, results of operations, and prospects.

CARES Act PPP Loan

On April 21, 2020, the Company entered into a promissory note evidencing an unsecured $0.9 million loan (the “PPP Loan”) under the Payroll Protection Program (“PPP”), of the Coronavirus Aid, Relief, and Economic Security Act, (“CARES Act”). The PPP loan is being made through Silicon Valley Bank. The term of the PPP loan is 24-months. The interest rate on the PPP loan is 1%, which shall be deferred for the first six months of the term of the loan. The promissory note evidencing the PPP loan contains customary events of default relating to, among other things, payment defaults, breach of representations and warranties, or provisions of the promissory note. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts we owe, and/or filing suit and obtaining judgment against us.

Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. Such forgiveness will be determined, subject to limitations, based on the use of loan proceeds for payroll costs and mortgage interest, rent or utility costs and the maintenance of employee and compensation levels. No assurance is provided that we will obtain forgiveness of the PPP loan in whole or in part.