What's Driving The Rally In Microcap Biotech Curis?

Thinly traded Curis, Inc. CRIS shares weremoving notably higher Monday on roughly 35 times their average volume.

What Happened

Curis announced Monday ahead of the market open that it reached an agreement with funds managed by Oberland Capital Management to sell the rights to a portion of royalty revenues on worldwide net sales of Erivedge for up to $135.7 million.

Curis will be paid $65 million in cash upfront, plus potential milestone payments of up to an additional $70.7 million if future net royalties exceed pre-defined annual and cumulative thresholds.

In return, Oberland will receive 100 percent of the first $13.2 million and 35 percent thereafter of annual net royalties due to Curis from worldwide net sales of Erivedge, excluding a portion of non-U.S. royalties retained by Curis.

Curis said it will use the proceeds from the sale of rights to retire existing debt and fund its operations.

Why It's Important

In the quarter ended Sept. 30, 2018, the company generated $2.847 million in revenues, with $2.781 million coming from royalties.

Curis has a collaboration agreement with Roche Holdings AG Basel ADR RHHBY and its Genetech unit for commercializing Erivedge, which is an orally administered small molecule Hedgehog signaling pathway inhibitor approved for the treatment for advanced basal cell carcinoma in early 2012.

Curis had licensed the drug to Roche under a 2003 collaboration agreement.

Curis has current liabilities amounting to $13.23 million as of September and net long-term debt of $30.22 million, according to its latest 10-Q filing.

"We believe this structure provides Curis with substantial non-dilutive capital today, while retaining significant participation in the future upside potential of Erivedge," said Curis President and CEO James Dentzer said in a statement. 

"The proceeds of this transaction further strengthen our cash position as we fund our three lead therapeutic candidates to reach their near term development catalysts and beyond."

What's Next

Curis is scheduled to report its fiscal fourth-quarter results Tuesday after the market close.

Analysts, on average, expect the company to report a loss of 21 cents per share on revenue of $2.6 million.

Curis shares were jumping 27.97 percent to $1.83 at the time of publication Monday. 

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