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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 10-Q 
(Mark one)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2021
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     .
Commission File Number: 000-30347
CURIS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware   04-3505116
(State or Other Jurisdiction of
Incorporation or Organization) 		  (I.R.S. Employer
Identification No.)
128 Spring Street, Building C - Suite 500, Lexington, Massachusetts 02421
(Address of Principal Executive Offices) (Zip Code)
Registrant’s Telephone Number, Including Area Code: (617) 503-6500

Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, Par Value $0.01 per share CRIS Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    ☒  Yes    ☐  No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    ☒  Yes    ☐  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ☐
Accelerated filer  ☐
Non-accelerated filer  ☒
Smaller reporting company    ☒
Emerging growth company   ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ☐  Yes    ☒  No
As of November 2, 2021, there were 91,609,165 shares of the registrant’s common stock, par value $0.01 per share, outstanding.

CURIS, INC. AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q
Table of Contents
 
    Page
Number
PART I. FINANCIAL INFORMATION
Item 1.
6
6
7
8
10
11
Item 2.
25
Item 3.
37
Item 4.
37
PART II.
Item 1A.
37
Item 6.
38
39

















2
Cautionary Note Regarding Forward-Looking Statements and Industry Data

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. All statements other than statements of historical fact contained in this report are statements that could be deemed forward-looking statements, including without limitation any statements with respect to the plans, strategies and objectives of management for future operations; statements concerning product research, development and commercialization plans, timelines and anticipated results; statements of expectation or belief; statements with respect to clinical trials and studies; statements with respect to royalties and milestones; statements with respect to the therapeutic potential of drug candidates; expectations of revenue, expenses, earnings or losses from operations, or other financial results; and statements of assumptions underlying any of the foregoing. Without limiting the foregoing, the words “anticipate(s)”, “believe(s)”, “focus(es)”, “could”, “estimate(s)”, “expect(s)”, “intend(s)”, “may”, “plan(s)”, “seek(s)”, “will”, “strategy”, “mission”, “potential”, “should”, “would" and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements may include, but are not limited to, statements about:
•the initiation, timing, progress and results of future preclinical studies and clinical trials, and our research and development programs;
•our plans to develop and commercialize our drug candidates;
•our collaborators’ plans to commercialize Erivedge;
•our ability to establish and maintain collaborations or obtain additional funding;
•the timing or likelihood of regulatory filings and approvals;
•the implementation of our business model, strategic plans for our business, drug candidates and technology;
•our commercialization, marketing and manufacturing capabilities and strategy;
•the rate and degree of market acceptance and clinical utility of our products;
•our competitive position;
•our intellectual property position;
•developments and projections relating to our competitors and our industry;
•the potential of CA-4948, CI-8993, CA-170, fimepinostat, CA-327, and other drug candidates that we in-license, or may elect to in-license, or may acquire in the future;
•our estimates of the period in which we anticipate that existing cash and cash equivalents will enable us to fund our current and planned operations;
•impacts resulting from the COVID-19 pandemic and responsive actions relating thereto;
•our ability to maintain our listing on the Nasdaq Global Market; and
•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. We therefore caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in these forward-looking statements include the factors discussed below under the heading “Risk Factor Summary,” and the risk factors detailed further in Item 1A, "Risk Factors" of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020 and, if applicable, those included under Part II, Item 1A of this Quarterly Report on Form 10-Q.
This report includes statistical and other industry and market data that we obtained from industry publications and research, surveys, and studies conducted by third parties as well as our own estimates. All of the market data used in this report involve a number of assumptions and limitations, and you are cautioned not to give undue weight to such data. Industry publications and third-party research, surveys, and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our estimates of the potential market opportunities for our drug candidates include several key assumptions based on our industry knowledge, industry publications, third-party research, and other surveys, which may be based on a small sample size and may fail to accurately reflect market opportunities. While we believe that our internal assumptions are reasonable, no independent source has verified such assumptions.
3
The forward-looking statements included in this report represent our estimates as of the filing date of this report. We specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our estimates or views as of any date subsequent to the date of this report.
Risk Factor Summary
Investment in our securities involves risk. You should carefully consider the following summary of what we believe to be the principal risks facing our business, in addition to the risks described more fully in Item 1A, “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, and, if applicable, those included under Part II, Item 1A of this Quarterly Report on Form 10-Q and other information included in this report. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations.
If any of the following risks occurs, our business, financial condition, and results of operations and future growth prospects could be materially and adversely affected, and the actual outcomes of matters as to which forward-looking statements are made in this report could be materially different from those anticipated in such forward-looking statements.
•We have incurred substantial losses, expect to incur substantial losses for the foreseeable future and may never generate significant revenue or achieve or maintain profitability.
•We will require substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our drug development programs or commercialization efforts.
•We face risks related to the novel coronavirus pandemic, COVID-19, which has delayed and may continue to delay our ability to complete our ongoing clinical trials and the enrollment and initiation of future clinical trials, and may disrupt regulatory activities, cause substantial disruption in the financial markets and economy, or have other adverse effects on our business and operations.
•We face substantial competition, and our competitors may discover, develop or commercialize drugs before or more successfully than we do. Furthermore, the amount of royalty revenue we received from sales of Erivedge has been adversely affected by a competing drug, and may be further affected in the future.
•We depend heavily on the success of our most advanced drug candidates, including CA-4948 and CI-8993. If we are unable to initiate or complete the clinical development of, obtain marketing approval for or successfully commercialize our drug candidates, either alone or with a collaborator, or if we experience significant delays in doing so, our business will be materially harmed.
•If clinical trials of any drug candidates that we, or any collaborators, may develop fail to satisfactorily demonstrate safety and efficacy to the U.S. Food and Drug Administration, or FDA, and other regulators, we, or any collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these drug candidates.
•Adverse events or undesirable side effects caused by, or other unexpected properties of, drug candidates that we develop may be identified during development and could delay or prevent their marketing approval or limit their use.
•We rely on Genentech and Roche for the successful commercialization of Erivedge, and if they do not successfully commercialize Erivedge for advanced basal cell carcinoma, or BCC, our future prospects may be substantially harmed.
•We rely in part on third parties to conduct clinical trials of our internally-developed and in-licensed product candidates and for the research, development and commercialization of certain programs, and those third parties may not perform satisfactorily, including by failing to meet deadlines for the completion of such trials, research or testing.
•In the event of a default by us or Curis Royalty under the Oberland Purchase Agreement, we could, among other consequences, lose our retained rights to future royalty and royalty related payments on commercial sales of Erivedge, and our ability to enter into future arrangements may be inhibited, all of which could have a material adverse effect on our business, financial condition and stock price.
•If we are unable to obtain and maintain sufficient patent protection for our technologies and drugs, or our licensors are not able to obtain and maintain sufficient patent protection for the technologies or drugs that we license from them, or if the scope of the patent protection is not sufficiently broad, our competitors could develop and commercialize drugs similar or identical to ours, and our ability to successfully commercialize our drug candidates may be adversely affected.
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•If we or our collaborators are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we or they will not be able to commercialize, or will be delayed in commercializing, our drug candidates, and our ability to generate revenue will be materially impaired.
 

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PART I—FINANCIAL INFORMATION
Item 1.    UNAUDITED FINANCIAL STATEMENTS

CURIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)

September 30, 2021 December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 53,020  $ 129,610 
Short-term investments 75,884  38,884 
Accounts receivable 2,959  3,043 
Prepaid expenses and other current assets 3,088  1,215 
Total current assets 134,951  172,752 
Long-term investments 20,922  14,564 
Property and equipment, net 543  663 
Restricted cash, long-term 726  816 
Operating lease right-of-use asset 5,962  6,578 
Goodwill 8,982  8,982 
Other assets —  3 
Total assets $ 172,086  $ 204,358 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 3,506  $ 4,166 
Accrued liabilities 5,310  3,625 
Current portion of operating lease liability 657  1,731 
Current portion long-term debt —  557 
Total current liabilities 9,473  10,079 
Long-term operating lease liability 4,537  5,040 
Liability related to the sale of future royalties, net 55,167  58,235 
Long-term debt —  334 
Total liabilities 69,177  73,688 
Stockholders’ equity:
Common stock, $0.01 par value—227,812,500 shares authorized; 91,609,165 shares issued and outstanding at September 30, 2021; 151,875,000 shares authorized; 91,502,461 shares issued and outstanding at December 31, 2020
916  915 
Additional paid-in capital 1,180,701  1,176,647 
Accumulated deficit (1,078,705) (1,046,889)
Accumulated other comprehensive income (3) (3)
Total stockholders’ equity 102,909  130,670 
Total liabilities and stockholders’ equity $ 172,086  $ 204,358 
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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CURIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(In thousands, except share and per share data)
(Unaudited)

  Three Months Ended
September 30,
Nine Months Ended
September 30,
  2021 2020 2021 2020
Revenues, net:
Royalties $ 3,058  $ 2,720  $ 7,593  $ 7,681 
Other revenue —  —  1  211 
Contra revenue, net (19) 22  (80) (81)
Total revenues, net 3,039  2,742  7,514  7,811 
Costs and expenses:
Cost of royalties 151  135  376  382 
Research and development 8,602  4,705  24,112  17,459 
General and administrative 4,334  2,613  12,524  8,593 
Total costs and expenses 13,087  7,453  37,012  26,434 
Loss from operations (10,048) (4,711) (29,498) (18,623)
Other expense:
Interest income 54  3  158  58 
Imputed interest expense related to the sale of future royalties (1,057) (1,266) (3,366) (3,848)
Other income (expense), net
—  —  890  22 
Total other expense (1,003) (1,263) (2,318) (3,768)
Net loss $ (11,051) $ (5,974) $ (31,816) $ (22,391)
Net loss per common share (basic and diluted) $ (0.12) $ (0.11) $ (0.35) $ (0.52)
Weighted average common shares (basic and diluted) 91,601,362  54,554,129  91,552,433  42,884,201 
Net loss $ (11,051) $ (5,974) $ (31,816) $ (22,391)
Other comprehensive income:
Unrealized gain (loss) on marketable securities —  —  —  — 
Comprehensive loss $ (11,051) $ (5,974) $ (31,816) $ (22,391)

The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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CURIS, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except share data)
(Unaudited)
Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Equity
Shares Amount
December 31, 2020 91,502,461  $ 915  $ 1,176,647  $ (1,046,889) $ (3) $ 130,670 
Recognition of stock-based compensation —  —  1,099  —  —  1,099 
Exercise of stock options 31,811  1  78  —  —  79 
Unrealized gain (loss) on marketable securities —  —  —  —  (6) (6)
Net loss —  —  —  (9,927) —  (9,927)
March 31, 2021 91,534,272  $ 916  $ 1,177,824  $ (1,056,816) $ (9) $ 121,915 
Recognition of stock-based compensation —  —  1,275  —  —  1,275 
Issuance of stock under Employee Stock Purchase Plan 20,791  —  68  —  —  68 
Exercise of stock options 41,306  —  48  —  —  48 
Unrealized gain (loss) on marketable securities —  —  —  —  6  6 
Net loss —  —  —  (10,838) —  (10,838)
June 30, 2021 91,596,369  $ 916  $ 1,179,215  $ (1,067,654) $ (3) $ 112,474 
Recognition of stock-based compensation —  —  1,464  —  —  1,464 
Exercise of stock options 12,796  —  22  —  —  22 
Unrealized gain (loss) on marketable securities —  —  —  —  —  — 
Net loss —  —  —  (11,051) —  (11,051)
September 30, 2021
91,609,165  $ 916  $ 1,180,701  $ (1,078,705) $ (3) $ 102,909 

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Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive (Loss) Income Total Stockholders’ Deficit
Shares Amount
December 31, 2019 33,241,793  $ 332  $ 982,738  $ (1,016,981) $ —  $ (33,911)
Recognition of stock-based compensation —  —  625  —  —  625 
Issuance of shares in connection with Aspire Capital Agreement, net of issuance costs 3,340,516  34  2,692  —  —  2,726 
Net loss —  —  —  (9,709) —  (9,709)
March 31, 2020 36,582,309  $ 366  $ 986,055  $ (1,026,690) $ —  $ (40,269)
Issuance of stock under registered direct offering, net of issuance costs 14,000,000  140  15,825  —  15,965 
Recognition of stock-based compensation —  —  585  —  585 
Issuance of stock under Employee Stock Purchase Plan 41,583  —  29  —  —  29 
Exercise of stock options 15,156  —  18  —  —  18 
Net loss —  —  —  (6,708) —  (6,708)
June 30, 2020 50,639,048  $ 506  $ 1,002,512  $ (1,033,398) $ —  $ (30,380)
Issuance of shares in connection with Aspire Capital Agreement 3,600,000  36  4,119  —  4,155 
Issuance of shares in connection with Capital on Demand™ Sales Agreement 2,413,837  24  3,205  —  3,229 
Fees for issuance of shares in connection with Capital on Demand™ Sales Agreement —  —  (262) —  —  (262)
Recognition of stock-based compensation —  —  624  —  624 
Net loss —  —  —  (5,974) (5,974)
September 30, 2020 56,652,885  $ 566  $ 1,010,198  $ (1,039,372) $ —  $ (28,608)


The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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CURIS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
  Nine Months Ended
September 30,
  2021 2020
Cash flows from operating activities:
Net loss $ (31,816) $ (22,391)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 120  116 
Non-cash lease expense 616  431 
Stock-based compensation expense 3,838  1,833 
Non-cash imputed interest expense related to the sale of future royalties 9  35 
Net amortization of premiums and discounts on marketable securities

1,013  35 
Gain on forgiveness of PPP Loan (890) — 
Changes in operating assets and liabilities:
Accounts receivable 84  500 
Prepaid expenses and other assets (1,870) (940)
Accounts payable and accrued and other liabilities 1,025  684 
Operating lease liability (1,577) (327)
Total adjustments 2,368  2,367 
Net cash used in operating activities (29,448) (20,024)
Cash flows from investing activities:
Purchase of investments (70,977) — 
Sales and maturities of investments 26,605  5,078 
Purchase of property and equipment —  (657)
Net cash provided by (used in) investing activities (44,372) 4,421 
Cash flows from financing activities:
Proceeds from PPP Loan —  890 
Proceeds of Aspire Capital Agreement, net of issuance costs —  6,881 
Proceeds of direct placement —  17,500 
Payment of issuance costs on direct placement —  (1,535)
Proceeds from issuance of common stock associated with Capital on Demand™ Sales Agreement —  3,229 
Payment of issuance costs associated with Capital on Demand™ Sales Agreement —  (262)
Proceeds from issuance of common stock under the Company's share-based compensation plan 217  47 
Payment of liability of future royalties, net of imputed interest (3,077) (3,175)
Net cash provided by (used in) financing activities (2,860) 23,575 
Net decrease in cash and cash equivalents and restricted cash (76,680) 7,972 
Cash and cash equivalents and restricted cash, beginning of period 130,426  16,399 
Cash and cash equivalents and restricted cash, end of period $ 53,746  $ 24,371 
Supplemental cash flow data:
Cash paid for interest 3,357  3,824 
Non-cash commitment shares issued to Aspire Capital —  900 
Right-of-use assets obtained in exchange for lease liabilities —  7,029 
    
The accompanying notes are an integral part of these Condensed Consolidated Financial Statements.
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CURIS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share data)
1.     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, an orally available small molecule inhibitor of Interleukin-1 receptor-associated kinase 4 ("IRAK4"), which is currently undergoing testing in a Phase 1/2 open-label dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with myeloid Differentiation Primary Response Protein 88 (“MYD88”) alterations. The trial was amended to include a combination study of CA-4948 and ibrutinib, a BTK inhibitor, in patients with non-Hodgkin lymphomas for which the Company enrolled the first patient in February 2021. The Company is also conducting a separate Phase 1/2 open-label, single arm dose escalating and expansion trial in patients with acute myeloid leukemia (“AML”) and myelodysplastic syndromes (“MDS”). The study was amended in April 2021 to include dose escalation cohorts of CA-4948 in combination with azacitidine or venetoclax. In April 2021, CA-4948 was granted Orphan Drug Designation for the treatment of AML and MDS by the U.S. Food and Drug Administration ("FDA"). In June 2021, we reported updated preliminary clinical data from the Phase 1/2 study in patients with AML or MDS and announced the recommended Phase 2 dose for monotherapy dose expansion.
•CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation (“VISTA”) signaling pathway. In June 2020, the Company announced that the FDA had cleared its Investigational New Drug (“IND”) application for CI-8993. In September 2020, enrollment for a Phase 1 trial in patients with solid tumors commenced. The Company has an option to license CI-8993 from ImmuNext, Inc. ("ImmuNext").
The Company’s pipeline also includes the following:
•Fimepinostat, a small molecule that potently inhibits the activity of histone deacetylase and phosphotidyl-inositol 3 kinase enzymes, which has been granted Orphan Drug Designation and Fast Track Designation for the treatment of diffuse large B-cell lymphoma and nuclear protein in testis (NUT) midline carcinoma. The Company is currently evaluating future studies for fimepinostat.
•CA-170, a small molecule antagonist of VISTA and PDL1, 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.
•CA-327, a small molecule antagonist of TIM3 and PDL1, is a pre-IND stage oncology drug candidate.
The Company is party to a collaboration with Genentech Inc. (“Genentech”), a member of the Roche Group, under which Genentech and F. Hoffmann-La Roche Ltd (“Roche”) are commercializing Erivedge® (vismodegib), a first-in-class orally administered small molecule Hedgehog signaling pathway antagonist. Erivedge is approved for the treatment of advanced basal cell carcinoma (“BCC”).
In January 2015, the Company entered into an exclusive collaboration agreement with Aurigene Discovery Technologies Limited (“Aurigene”) for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and precision oncology, which was amended in September 2016 and February 2020.

As of September 30, 2021, the Company had licensed four programs under the Aurigene collaboration.
•IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
•PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
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•PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
•The Company exercised its option to license a fourth program, which is an immuno-oncology program.
The COVID-19 pandemic has had and may continue to have an adverse effect on the Company’s business, financial condition, results of operations, and prospects. With respect to ongoing clinical trials, the anticipated timing of enrollment and the overall timelines of the trials have experienced delays and could be further delayed to the extent the Company experiences further delays in enrollment due to the COVID-19 pandemic. The Company’s ability to collect patient data in a timely fashion may also be impacted. The Company experienced 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 delayed the winding down of these trials. In addition, the Company and its collaborators, third-party contract manufacturers, contract research organizations and clinical sites could experience delays or disruptions in supply and release of product candidates and/or procuring items that are essential for the Company's 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 or supply chain disruptions as a result of the pandemic. The Company cannot be certain what the overall impact of the COVID-19 pandemic will be on its business.
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 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 relationship with Aurigene to support development of 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 (the “Purchasers”) each of which is a Delaware limited partnership managed by Oberland Capital Management, LLC, and Lind SA LLC (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 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 support advancement of development candidates under the Company’s collaboration with Aurigene, as well as the Company’s ability to further develop programs under this collaboration; and Roche and Genentech’s ability to successfully commercialize Erivedge.
The Company will require substantial funds to maintain research and development programs and support operations. The Company has incurred net losses and negative cash flows from operations since its inception. As of September 30, 2021, the Company had an accumulated deficit of approximately $1.1 billion, and for the nine months ended September 30, 2021, the Company incurred a net loss of $31.8 million and used $29.4 million of cash in operations. The Company expects to continue to generate operating losses in the foreseeable future. The Company anticipates that its $149.8 million of existing cash, cash equivalents and investments at September 30, 2021 will be sufficient to fund operations for at least 12 months from the date of filing this Quarterly Report on Form 10-Q.
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.
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2.     Summary of Significant Accounting Policies
(a)Basis of Presentation and Principles of Consolidation
The accompanying Condensed Consolidated Financial Statements have been prepared in accordance with the instructions to Form 10-Q and Article 8 of Regulation S-X. These statements, however, are condensed and do not include all disclosures required by accounting principles generally accepted in the U.S. (“GAAP”), for complete financial statements and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission (“SEC”), on March 16, 2021.
In the opinion of the management of the Company, the unaudited financial statements contain all adjustments (all of which were considered normal and recurring) necessary for a fair statement of the Company’s financial position at September 30, 2021; the results of operations for the three and nine-month periods ended September 30, 2021 and 2020; stockholders' equity (deficit) for the three and nine-month periods ended September 30, 2021 and 2020; and the cash flows for the nine-month periods ended September 30, 2021 and 2020. The Condensed Consolidated Balance Sheet at December 31, 2020 was derived from audited annual financial statements but does not contain all of the footnote disclosures from the annual financial statements.
Certain prior period amounts within the statement of cash flows have been reclassified to conform to the current period presentation.
(b)Use of Estimates and Assumptions
The preparation of the Company’s Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at the balance sheet date. Such estimates include the performance obligations under the Company’s collaboration agreements; the estimated repayment term of the Company’s debt and related short- and long-term classification; the collectability of receivables; the carrying value of property and equipment and goodwill; and the assumptions used in the Company’s valuation of stock-based compensation and the value of certain investments and liabilities. Actual results may differ from such estimates.
These interim results are not necessarily indicative of results to be expected for a full year or subsequent interim periods.
The extent to which COVID-19 has had and may continue to have impacts on the Company’s business and financial results will depend on numerous evolving factors including, but not limited to: the magnitude and duration of the COVID-19 pandemic, the extent to which it has impacted and may continue to impact worldwide macroeconomic conditions including interest rates, employment rates and health insurance coverage, the speed of the anticipated recovery, and governmental and business responses to the pandemic. The Company assessed certain accounting matters that generally require consideration of forecasted financial information in context with the information reasonably available to the Company and the unknown future impacts of COVID-19 as of September 30, 2021 and through the date of this report. The Company’s future assessment of the magnitude and duration of the COVID-19 pandemic, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods.
(c) Cash Equivalents, Restricted Cash, and Investments
Cash equivalents consist of highly liquid investments purchased with original maturities of three months or less. All other liquid investments are classified as marketable securities.
The Company classified $0.7 million of its cash as restricted cash as of September 30, 2021 and $0.8 million as of December 31, 2020. This amount represents the security deposit delivered to the landlord of the Company's current Massachusetts headquarters. The restricted cash balance was reduced as of September 30, 2021 in accordance with the lease agreement.
The Company's combined cash and restricted cash balances were $53.7 million and $24.4 million as of September 30, 2021 and September 30, 2020, respectively, as presented on the Company's Condensed Consolidated Statements of Cash Flows.
The Company’s short-term investments are marketable debt securities with original maturities of greater than three months from the date of purchase, but less than twelve months from the balance sheet date, and long-term investments are marketable debt securities with original maturities of greater than twelve months from the balance sheet date. Marketable securities consist of commercial paper, corporate bonds and notes, and/or government obligations. All of the Company’s investments have been designated available-for-sale and are stated at fair value. Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity (deficit). Realized gains and losses, dividends and interest income are included in other income (expense) in the period during which the securities are sold. Any premium or discount arising at purchase is amortized and/or accreted to interest income.
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(d)Leases
The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
As most of the Company's leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate, which is based on rates that would be incurred to borrow on a collateralized basis over a term equal to the lease payments in a similar economic environment, in determining the present value of lease payments.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The lease payment used to determine the operating lease asset may include lease incentives, stated rent increases and was recognized as an operating lease right-of-use asset in the Condensed Consolidated Balance Sheets. The Company's lease agreements may include both lease and non-lease components, which are accounted for as a single lease component when the payments are fixed. Variable payments included in the lease agreement are expensed as incurred.
The Company's operating lease is reflected in operating lease right-of-use asset and operating lease liability in the Condensed Consolidated Balance Sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
(e)Revenue Recognition
The Company’s business strategy includes entering into collaborative license and development agreements with biotechnology and pharmaceutical companies for the development and commercialization of the Company’s drug candidates. The terms of the agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical development and regulatory objectives, and royalties on product sales.
License Fees and Multiple Element Arrangements
If a license to its intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenues from non-refundable, up-front fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from, the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, will adjust the measure of performance and related revenue recognition.
If the Company is involved in a steering committee as part of a multiple element arrangement, the Company assesses whether its involvement constitutes a performance obligation or a right to participate. Steering committee services that are not determined to be distinct performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, the Company considers the nature of service that it promises to transfer to the customer. When the Company decides on a method of measurement, the Company will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.
If the Company cannot reasonably measure its progress toward complete satisfaction of a performance obligation because the Company lacks reliable information that would be required to apply an appropriate method of measuring progress, but it can reasonably estimate when the performance ceases or the remaining obligations become inconsequential and perfunctory, then revenue is not recognized until the Company can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance.
Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.
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Contingent Research Milestone Payments
Accounting Standards Codification ("ASC") 606 constrains the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.
If the consideration in a contract includes a variable amount, a company will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if a company’s entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. The Company considers contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.
The Company assesses whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the milestone revenues could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.
GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinative. The Company considers all relevant factors.
Reimbursement of Costs
Reimbursement of research and development costs by third-party collaborators is recognized as revenue over time provided the Company has determined that it transfers control (i.e. performs the services) of a service over time and, therefore, satisfies a performance obligation according to the provisions outlined in ASC 606-10-25-27, Revenue Recognition.
Royalty Revenue
The Company recognizes royalty revenues related to Genentech’s and Roche’s sales of Erivedge. For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company expects to continue recognizing royalty revenue from Genentech’s sales of Erivedge in the U.S. and in other markets where Genentech and Roche successfully obtain marketing approval, if any (see Note 9, Research and Development Collaborations). However, a portion of potential Erivedge royalties will be paid to the Purchasers pursuant to the Oberland Purchase Agreement (see Note 8, Liability Related to the Sale of Future Royalties).
Contra Revenue, Net
Contra revenue, net represents shared costs, primarily related to intellectual property, with the Company's collaboration partners, and reserves for potential royalty reductions.
With respect to each of the foregoing areas of revenue recognition, the Company exercises significant judgment in determining whether an arrangement contains multiple elements, and, if so, how much revenue is allocable to each element. In addition, the Company exercises its judgment in determining when its significant obligations have been met under such agreements and the specific time periods over which the Company recognized revenue, such as non-refundable, up-front license fees. To the extent that actual facts and circumstances differ from the Company's initial judgments, its revenue recognition with respect to such transactions would change accordingly and any such change could affect the Company's reported financial results.
Summary
During the three and nine months ended September 30, 2021, total gross revenues were 99% from the Company’s collaboration with Genentech. During the three and nine months ended September 30, 2020 total gross revenues were 100% and 97%, respectively, from the Company’s collaboration with Genentech. In addition to the revenues received from Genentech, the Company received a milestone payment from a previously out-licensed technology in the first quarter of 2020 that was recorded in other revenues. There were no such revenues recorded during the three and nine months ended September 30, 2021.
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(f)Segment Reporting
The Company operates in a single reportable segment, which is the research and development of innovative cancer therapeutics.
(g)New Accounting Pronouncements
Recently Adopted
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard requires that for most financial assets, losses be based on an expected loss approach which includes estimates of losses over the life of exposure that considers historical, current and forecasted information. Expanded disclosures related to the methods used to estimate the losses as well as a specific disaggregation of balances for financial assets are also required. The targeted transition relief standard allows filers an option to irrevocably elect the fair value option of ASC 825-10, Financial Instruments-Overall, applied on an instrument-by-instrument basis for eligible instruments. In November 2019 the effective date for smaller reporting companies was extended to January 1, 2023 with the issuance of ASU 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates. The Company adopted ASU 2016-13 as of January 1, 2021 and the adoption did not have a material impact on the Consolidated Financial Statements.
3.     Fair Value of Financial Instruments
The Company has adopted the provisions of the FASB Codification Topic 820, Fair Value Measurements and Disclosures (“Topic 820”) for its financial assets and liabilities that are re-measured and reported at fair value each reporting period and the non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability. Topic 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and liabilities are categorized within the valuation hierarchy based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:
Level 1 Quoted prices in active markets for identical assets or liabilities.
Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In accordance with the fair value hierarchy, the following table shows the fair value as of September 30, 2021 and December 31, 2020 of those financial assets and liabilities that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair value. No financial assets or liabilities are measured at fair value on a nonrecurring basis at September 30, 2021 and December 31, 2020.
(in thousands) Quoted Prices in
Active Markets
(Level 1) 		Other Observable
Inputs (Level 2) 		Unobservable
Inputs (Level 3) 		Fair Value
As of September 30, 2021:
Cash equivalents:
Money market funds $ 49,018  $ —  $ —  $ 49,018 
Short-term investments:
Corporate commercial paper, bonds and notes —  75,884  —  75,884 
Long-term investments:
Corporate commercial paper, bonds and notes —  20,922  —  20,922 
Total $ 49,018  $ 96,806  $ —  $ 145,824 
    

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(in thousands) Quoted Prices in
Active Markets
(Level 1) 		Other Observable
Inputs (Level 2) 		Unobservable
Inputs (Level 3) 		Fair Value
As of December 31, 2020:
Cash equivalents:
Money market funds $ 115,278  $ —  $ —  $ 115,278 
Short-term investments:
Corporate commercial paper, bonds and notes —  38,884  —  38,884 
Long-term investments:
Corporate commercial paper, bonds and notes —  14,564  —  14,564 
Total $ 115,278  $ 53,448  $ —  $ 168,726 
4.     Investments
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of September 30, 2021 are as follows:
(in thousands) Amortized
Cost 		Unrealized
Gain 		Unrealized
Loss 		Fair Value
Corporate bonds and notes—short-term $ 75,880  $ 4  $ —  $ 75,884 
Corporate bonds and notes—long-term $ 20,929  —  (7) $ 20,922 
Total investments $ 96,809  $ 4  $ (7) $ 96,806 
Short-term investments have maturities ranging from one to twelve months with a weighted-average maturity of 0.6 years at September 30, 2021. The weighted average maturity of long-term investments was 1.6 years at September 30, 2021.
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2020 are as follows:
(in thousands) Amortized
Cost 		Unrealized
Gain 		Unrealized
Loss 		Fair Value
Corporate bonds and notes—short-term $ 38,888  $ —  $ (4) $ 38,884 
Corporate bonds and notes—long-term 14,563  1  —  14,564 
Total investments $ 53,451  $ 1  $ (4) $ 53,448 
Short-term investments have maturities ranging from one to twelve months with a weighted-average maturity of 0.6 years at December 31, 2020. The weighted average maturity of long-term investments was 1.5 years at December 31, 2020.
No credit losses on available-for-sale securities were recognized during the three and nine months ended September 30, 2021 or September 30, 2020. In its evaluation to determine expected credit losses, management considered all available historical and current information, expectations of future economic conditions, the type of security, the credit rating of the security, and the size of the loss position, as well as other relevant information. The Company does not intend to sell, and is unlikely to be required to sell, any of these available-for-sale investments before their effective maturity or market price recovery.
As of September 30, 2021 and December 31, 2020, the Company held no investments that have been in a continuous unrealized loss position for 12 months or longer.
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5.     Accrued Liabilities
Accrued liabilities consisted of the following:
(in thousands) September 30, 2021 December 31, 2020
Compensation and related costs $ 2,473  $ 2,638 
Chemistry, manufacturing and controls costs 1,910  — 
Professional and legal fees 541  307 
License fees 188  375 
Other 198  305 
Total $ 5,310  $ 3,625 
6.     Debt
In April 2020, the Company entered into a promissory note evidencing an unsecured $0.9 million loan (the “PPP Loan”) under the Paycheck Protection Program (“PPP”), of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) as administered by the U.S. Small Business Administration (the "SBA"). The PPP Loan was made by Silicon Valley Bank and had a term of 24-months and an interest rate of 1%. Under the terms of the CARES Act and the Paycheck Protection Program Flexibility Act of 2020, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. The Company applied for such forgiveness in 2020 and received notification in June 2021 that the SBA had forgiven the PPP Loan in full, including interest accrued on the PPP Loan. During the nine months ended September 30, 2021, the Company recorded a gain of $0.9 million to Other income (expense), net for extinguishment of the debt. As of December 31, 2020, the Company recorded short- and long-term debt related to the PPP Loan of $0.6 million and $0.3 million, respectively.
7.     Lease
The Company has a single lease for real estate, including laboratory and office space, and certain equipment. The lease at 128 Spring Street in Lexington, Massachusetts commenced on May 1, 2020 which is the date when the property became available for use to the Company. In accordance with the accounting requirements under ASC 842, the lease obligation was not recorded until its commencement. The discount rate associated with the Company's right-of-use asset is 9.95%.
As of September 30, 2021, the Company had an operating lease liability of $5.2 million and related right-of-use asset of $6.0 million related to its operating lease. As of December 31, 2020, the Company had an operating lease liability of $6.8 million and related right-of-use asset of $6.6 million related to its operating lease. The Company recorded a lease cost of $0.3 million and $1.0 million for the three and nine months ended September 30, 2021, respectively. The Company recorded a lease cost of $0.4 and $1.0 million for the three and nine months ended September 30, 2020, respectively. The total cash obligation over the seven year term of this lease is approximately $9.3 million, of which $0.3 million was paid during the three months ended September 30, 2021 and $2.0 million was paid during the nine months ended September 30, 2021. The payments included a payment of $1.1 million for tenant improvements. The Company did not make cash payments during the three months ended September 30, 2020. The Company paid $0.2 million during the nine months ended September 30, 2020.
8.     Liability Related to the Sale of Future Royalties
In March 2019, the Company and Curis Royalty entered into the royalty interest purchase agreement (“Oberland Purchase Agreement”) with entities managed by Oberland Capital Management, LLC (the “Purchasers”). The Company sold to the Purchasers a portion of its rights to receive royalties from Genentech on potential net sales of Erivedge. Concurrently with the closing of the Oberland Purchase Agreement, Curis Royalty used a portion of the proceeds to terminate and repay the then existing loan with HealthCare Royalty Partners, III, L.P..
As upfront consideration for the purchase of the royalty rights, at closing the Purchasers paid to Curis Royalty $65.0 million less certain transaction expenses. Curis Royalty will also be entitled to receive up to approximately $70.7 million in milestone payments based on sales of Erivedge as follows: (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026.
The Oberland Purchase Agreement provides that after the occurrence of an event of default as defined under the security agreement by Curis Royalty, the Purchasers shall have the option, for a period of 180 days, to require Curis Royalty to repurchase a portion of certain royalty and royalty related payments, excluding a portion of non U.S. royalties retained by Curis Royalty (the “Purchased Receivables”), at a price (the “Put/Call Price”), equal to a percentage, beginning at a low triple digit
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percentage and increasing over time up to a low mid triple digit percentage of the sum of the upfront purchase price and any portion of the milestone payments paid in a lump sum by the Purchasers, if any, minus certain payments previously received by the Purchasers with respect to the Purchased Receivables. Additionally, Curis Royalty shall have the option at any time to repurchase the Purchased Receivables at the Put/Call Price as of the date of such repurchase. No events of default existed as of September 30, 2021.
As a result of the obligation to pay future royalties to Oberland, the Company recorded the proceeds from this transaction as a liability on its Consolidated Balance Sheet that will be accounted for using the interest method over the estimated life of the Oberland Purchase Agreement. As a result, the Company imputes interest on the transaction and records imputed interest expense at the estimated interest rate. The Company's estimate of the interest rate under the agreement is based on the amount of royalty payments expected to be received by Oberland over the life of the arrangement. The projected amount of royalty payments expected to be paid to Oberland involves the use of significant estimates and assumptions with respect to the revenue growth rate in the Company's projections of sales of Erivedge. The Company periodically assesses the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than its initial estimates or the timing of such payments is materially different than its original estimates, the Company will adjust the amortization of the liability.
The Company determined the fair value of the liability related to the sale of future royalties at the time of the Oberland Purchase Agreement to be $65.0 million, with a current effective annual imputed interest rate of 7.6%. The Company incurred $0.6 million of transaction costs in connection with the agreement. These transaction costs are amortized to imputed interest expense over the estimated term of the Oberland Purchase Agreement. The Company determined that the fair value assessment of the liability related to the sale of future royalties is a Level 3 assessment within the valuation hierarchy.
The following table shows the activity with respect to the liability related to the sale of future royalties during the nine months ended September 30, 2021.
(in thousands)
Carrying value of liability related to the sale of future royalties at January 1, 2021 $ 58,235 
Amortization of capitalized issuance costs 46 
Imputed interest expense recognized for the nine months ending September 30, 2021
3,320 
Less: payments to Oberland Capital, LLC (6,434)
Carrying value of liability related to the sale of future royalties at September 30, 2021
$ 55,167 
9.     Research and Development Collaborations
 
(a)Genentech
In June 2003, the Company licensed its proprietary Hedgehog pathway antagonist technologies to Genentech for human therapeutic use. The primary focus of the collaborative research plan has been to develop molecules that inhibit the Hedgehog pathway for the treatment of various cancers. The collaboration is currently focused on the development of Erivedge, which is being commercialized by Genentech in the U.S. and by Genentech’s parent company, Roche, in several other countries for the treatment of advanced BCC. Pursuant to the agreement, the Company is eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connection with the development of Erivedge or another small molecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatory objectives. Of this amount, the Company has received $59.0 million in cash milestone payments as of September 30, 2021.
In addition to these payments and pursuant to the collaboration agreement, the Company is entitled to a royalty on net sales of Erivedge that ranges from 5% to 7.5%. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances.
The Company recognized $3.1 million and $2.7 million in royalty revenue under the Genentech collaboration during the three months ended September 30, 2021 and 2020, respectively. The Company recognized $7.6 million in royalty revenue under the Genentech collaboration during the nine months ended September 30, 2021 and $7.7 million during the nine months ended September 30, 2020. The Company also recorded costs of royalty revenues within the costs and expenses section of its Condensed Consolidated Statements of Operations and Comprehensive Loss of $0.2 million during the three months ended September 30, 2021 and $0.1 million during the three months ended September 30, 2020. The Company recorded $0.4 million of costs of royalty revenues during the nine months ended September 30, 2021 and 2020. Cost of royalty revenues comprises 5% of the royalty payments that Curis Royalty receives from Genentech, through February 2022, which the Company is obligated to pay to university licensors.
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The Company recorded receivables from Genentech under this collaboration, comprised primarily of Erivedge royalties earned in the first half of 2021 and 2020. The receivable recorded in the Company's current assets section of its Condensed Consolidated Balance Sheets amounted to $3.0 million as of September 30, 2021 and December 31, 2020, respectively.
As previously discussed in Note 8, Liability Related to the Sale of Future Royalties, a portion of royalty revenues received from Genentech on net sales of Erivedge will be paid to the Purchasers pursuant to the Oberland Purchase Agreement.
(b)Aurigene
In January 2015, the Company entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and selected precision oncology targets, which was amended in September 2016. Under the collaboration agreement, Aurigene granted the Company an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene. In February 2020, the collaboration agreement was further amended whereby Aurigene received rights to develop and commercialize CA-170 in Asia in addition to its existing rights in India and Russia, and the Company became entitled to receive royalty payments on potential future sales of CA-170 in Asia at percentage rates ranging from the high single digits up to 10% subject to specified reductions.
As of September 30, 2021, the Company has exercised its option to license the following four programs under the collaboration:
1.IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
2.PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.
Since January 2015, the Company has paid $14.5 million in research payments and Aurigene has waived $19.5 million in milestone payments. For each of the IRAK4, PD1/VISTA, and PD1/TIM3 programs, and the fourth immuno-oncology program: the Company has remaining unpaid or unwaived payment obligations of $42.5 million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additional indications, if any. The Company is further obligated to pay Aurigene tiered royalties on the Company's and its affiliates' annual net sales of products at percentage rates ranging from the high single digits up to 10%, subject to specified reductions. In addition, the Company agreed to make certain payments to Aurigene upon its entry into sublicense agreements on any program(s).
In addition to the collaboration agreement, the Company has entered into a master development and manufacturing agreement with Aurigene for the supply of drug substance and drug product. Under this agreement, the Company incurred $0.5 million in research and development expense during the three months ended September 30, 2021 and $1.2 million during the nine months ended September 30, 2021. The Company recorded less than $0.1 million in prepaid expenses and $0.9 million in accrued expenses as of September 30, 2021 associated with this agreement. The Company expensed $0.6 million and $0.8 million related to Aurigene for the three and nine month periods ended September 30, 2020, respectively.
(c)ImmuNext
The Company has entered into an option and license agreement with ImmuNext (the “ImmuNext Agreement”). Under the terms of the ImmuNext Agreement, the Company agreed to engage in a collaborative effort with ImmuNext, and to conduct a Phase 1 clinical trial of CI-8993. In exchange, ImmuNext granted the Company an exclusive option, exercisable until the earlier of January 2024 or (b) 90 days after database lock for the first Phase 1 trial in which the endpoints are satisfied (the “Option Period”), to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology.
During the Option Period, the Company is obligated to pay a semi-annual fee of $0.4 million to ImmuNext and will conduct the Phase 1 trial, and ImmuNext will conduct certain agreed upon non-clinical research activities to support the Phase 1 trial. Additionally, the Company will assign to ImmuNext all right, title and interest in and to, inventions made by the Company alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the ImmuNext Agreement and any
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patent rights covering those inventions. If the option is exercised, ImmuNext will assign to the Company (i) all such inventions that were made solely by the Company and any patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period and (ii) a joint ownership interest in all such inventions that were made jointly by the Company and ImmuNext and patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period, except for any of those inventions that relates to certain compounds to which ImmuNext has retained exclusive rights. In addition, the Company has agreed to reimburse ImmuNext for certain documented external costs and expenses incurred by ImmuNext in carrying out non-clinical research activities approved by the joint steering committee, up to $0.3 million per calendar year, unless otherwise agreed to by both parties in writing.
If the Company elects to exercise the option, the Company has agreed to pay to ImmuNext an option exercise fee of $20.0 million. ImmuNext will be eligible to receive up to $4.6 million in potential development milestones, up to $84.3 million in potential regulatory approval milestones, and up to $125.0 million in potential sales milestone payments from us. ImmuNext is also eligible to receive tiered royalties on annual net sales on a product-by-product and country-by-country basis, at percentage rates ranging from high single digits to low double digits, subject to specified adjustments. In addition, the Company has agreed to pay ImmuNext a low double-digit percentage of sublicense revenue received by the Company or its affiliates.

10.     Common Stock
(a)Charter Amendments
In June 2020, the Company's stockholders approved an increase to the number of authorized shares of its common stock from 101,250,000 shares to 151,875,000 shares. The Company filed an amendment to its certificate of incorporation in June 2020 to effect such increase.
In May 2021, the Company's stockholders approved an increase to the number of authorized shares of its common stock from 151,875,000 shares to 227,812,500 shares. The Company filed an amendment to its certificate of incorporation in May 2021 to effect such increase.
(b)2021 Sales Agreement with Cantor Fitzgerald & Co. and JonesTrading Institutional Services LLC
In March 2021, the Company entered into a sales agreement (the “2021 Sales Agreement”) with Cantor Fitzgerald & Co., or Cantor, and JonesTrading Institutional Services LLC , or JonesTrading, to sell from time to time up to $100.0 million of the Company’s common stock through an “at the market offering” program under which Cantor and JonesTrading act as sales agents. Subject to the terms and conditions of the 2021 Sales Agreement, Cantor and JonesTrading can sell the common stock by any method deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”).
Pursuant to the terms of the 2021 Sales Agreement, the aggregate compensation payable to each of Cantor and JonesTrading is 3% of the gross proceeds from sales of the common stock sold by Cantor or JonesTrading, as applicable. Each party agreed in the 2021 Sales Agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the 2021 Sales Agreement. To date, the Company has not made any sales of common stock pursuant to the 2021 Sales Agreement.
The securities in this transaction were offered pursuant to an automatic shelf registration statement on Form S-3ASR (File No. 333-254362) that was filed with the SEC on March 16, 2021.
(c)2020 Public Offering
In December 2020, the Company completed an underwritten public offering of 29,500,000 shares of the Company's common stock, including 3,847,826 shares issued and sold to the underwriters upon the exercise in full of their option to purchase additional shares, at a price of $5.75 per share, for aggregate gross proceeds of $169.6 million, before deducting underwriting discounts and commissions and other offering expenses of $10.2 million. The securities in this transaction were offered pursuant to a shelf registration statement on Form S-3 (File No. 333-224627) that was filed with the SEC on May 3, 2018 and declared effective by the SEC on May 17, 2018 and an additional registration statement on Form S-3 (File No. 333-251211) filed pursuant to Rule 462(b) which became automatically effective on December 9, 2020.
(d)2020 Registered Direct Offering
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In June 2020, the Company entered into a securities purchase agreement with certain institutional investors, pursuant to which the Company issued and sold, in a registered direct offering, an aggregate of 14,000,000 shares of the Company's common stock at a purchase price per share of $1.25, for aggregate gross proceeds of $17.5 million, before deducting fees of approximately $1.0 million paid to the placement agent and other estimated offering expenses of approximately $0.5 million paid by the Company. JonesTrading acted as the exclusive placement agent for the transaction, and the shares were offered by the Company pursuant to its universal shelf registration statement on Form S-3, which was filed with the SEC on May 3, 2018 and declared effective by the SEC on May 17, 2018 (File No. 333-224627), and a prospectus supplement thereunder.
(e)2020 Sales Agreement with JonesTrading Institutional Services LLC
In March 2020, the Company entered into a Capital on Demand™ Sales Agreement (the “Sales Agreement”) with JonesTrading to sell from time to time up to $30.0 million of the Company’s common stock through an “at-the-market” equity offering program under which JonesTrading acted as sales agent. Subject to the terms and conditions of the Sales Agreement, JonesTrading could sell the common stock by any method deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act, including sales made directly on the Nasdaq Global Market, on any other existing trading market for the common stock or to or through a market maker other than on an exchange. In addition, with the Company’s prior written approval, JonesTrading could also sell the common stock by any other method permitted by law, including in privately negotiated transactions.
Pursuant to the terms of the Sales Agreement, the aggregate compensation payable to JonesTrading was 3% of the gross proceeds from sales of the common stock sold by JonesTrading pursuant to the Sales Agreement. Each party agreed in the Sales Agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the Sales Agreement.
The Company terminated this sales agreement effective as of December 9, 2020. The Company did not incur any termination penalties as a result of the termination. As of the effective date of the termination of the Sales Agreement, the Company had sold an aggregate of 6,298,648 shares of common stock under the sales agreement for aggregate gross proceeds of $8.3 million and net proceeds of $7.9 million after deducting commissions and offering expenses. The $21.7 million of common stock that remained unsold at the time of termination is no longer available.
(f)Aspire Capital Fund LLC
In February 2020, the Company entered into a common stock purchase agreement (the “Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”) for the sale of up to $30.0 million of the Company's common stock. Under the terms of the Agreement, Aspire Capital has committed to purchase such shares of the Company's common stock at the Company’s request, from time to time during a 30-month period at prices based on the market price at the time of each sale, subject to specified terms and limitations.
Aspire Capital made an initial investment of $3.0 million through the purchase of 2,693,965 shares of the Company's common stock. In 2020, Aspire Capital subsequently purchased an additional 4,650,000 shares of the Company's common stock for $5.4 million. In addition, as consideration for Aspire Capital’s obligation under the Agreement, the Company issued 646,551 shares of common stock to Aspire Capital as a commitment fee. As of September 30, 2021 and December 31, 2020, a total of $21.6 million remained available under the Agreement. The Company did not sell shares of common stock under the Agreement during the three and nine months ended September 30, 2021. For the three months ended September 30, 2020, 3,600,000 shares were sold representing net proceeds of $4.2 million. For the nine months ended September 30, 2020, 6,293,965 shares were sold representing net proceeds of $6.8 million.
Under the terms of the Agreement, the Company has the right to sell up to 150,000 shares of common stock per day to Aspire Capital, which total may be increased by mutual agreement up to an additional 2,000,000 shares per day. The extent to which the Company relies on Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of its common stock and the extent to which it is able to secure working capital from other sources.
There are no warrants, derivatives, or other share classes associated with this Agreement. The Company will control the timing and amount of the further sale of its common stock to Aspire Capital. There are no restrictions on future financings and there are no financial covenants, participation rights, rights of first refusal, or penalties in the Agreement. The Company has the right to terminate the Agreement at any time without any additional cost or penalty.
The Company also entered into a Registration Rights Agreement with Aspire Capital in connection with its entry into the Agreement.
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11.     Stock Plans and Stock-Based Compensation
As of September 30, 2021, the Company had two shareholder-approved, stock-based compensation plans: (i) the Amended and Restated 2010 Employee Stock Purchase Plan (“ESPP”), adopted by the Board of Directors in April 2017 and approved by shareholders in June 2017, and (ii) the Fourth Amended and Restated 2010 Stock Incentive Plan (“2010 Plan”). New employees are typically issued options as an inducement equity award under Nasdaq Listing Rule 5635(c)(4) outside of the 2010 Plan.
The Fourth Amended and Restated 2010 Stock Incentive Plan
The 2010 Plan permits the granting of incentive and non-qualified stock options and stock awards to employees, officers, directors, and consultants of the Company and its subsidiaries at prices determined by the Company’s Board of Directors. In May 2021, the Company's shareholders approved the Company's Fourth Amended and Restated 2010 Stock Incentive Plan to reserve an additional 11,000,000 shares of common stock for issuance under the 2010 Plan. The Company can issue up to 23,190,000 shares of its common stock pursuant to awards granted under the 2010 Plan. Options become exercisable as determined by the Board of Directors and expire up to ten years from the date of grant. The 2010 Plan uses a “fungible share” concept under which each share of stock subject to awards granted as options and stock appreciation rights (“SARs”), will cause one share per share under the award to be removed from the available share pool, while each share of stock subject to awards granted as restricted stock, restricted stock units, other stock-based awards or performance awards where the price charged for the award is less than 100% of the fair market value of the Company’s common stock will cause 1.3 shares per share under the award to be removed from the available share pool. As of September 30, 2021 the Company has only granted options to purchase shares of the Company’s common stock with an exercise price equal to the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date. As of September 30, 2021, 13,595,840 shares remained available for grant under the 2010 Plan.
Stock Options
During the nine months ended September 30, 2021, the Company’s board of directors granted options to purchase 1,086,000 shares of the Company’s common stock to the officers and employees of the Company, under the 2010 Plan. Shares granted to officers and employees vest as to 25% of the shares underlying the award on the first anniversary of the grant date and as to an additional 6.25% of the shares underlying the award at the end of each subsequent quarter, based upon continued employment over a four year period, and are exercisable at a price equal to the closing price of the Company’s common stock on the Nasdaq Global Market on the grant date.
During the first quarter of 2021, the Company’s board of directors granted options to its non-employee directors to purchase 132,000 shares of common stock under the 2010 Plan, which will vest and become exercisable one year from the grant date. There were no additional non-employee grants made in the three months ended September 30, 2021. In addition, during the nine months ended September 30, 2021 the Company's board of directors issued options to newly-hired employees as an inducement equity award under Nasdaq Listing Rule 5635(c)(4) outside of the 2010 Plan to purchase 613,850 shares of common stock. These options will vest as to 25% of the shares underlying the option on the first anniversary of the grant date, and as to an additional 6.25% of the shares underlying the option on each successive three-month period thereafter. All option awards are exercisable at a price equal to the closing price of the Company’s common stock on the Nasdaq Global Market on the grant dates.
A summary of stock option activity under the 2010 Plan and inducement awards are summarized as follows:
Number of
Shares 		Weighted
Average
Exercise
Price per
Share 		Weighted
Average
Remaining Contractual Life 		Aggregate Intrinsic Value
Outstanding, December 31, 2020 8,668,005  $ 2.71  7.98
Granted 1,831,850  9.21 
Exercised (85,751) 1.74 
Canceled/Forfeited (115,825) 11.76 
Outstanding, September 30, 2021
10,298,279  $ 3.77  7.59 $ 47,967 
Exercisable at September 30, 2021
5,689,507  $ 3.31  6.96 $ 29,624 
Vested and unvested expected to vest at September 30, 2021
9,963,214  $ 3.73  7.56 $ 46,817 
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The weighted average grant date fair values of the stock options granted during the nine months ended September 30, 2021 and 2020 were $9.21 and $0.75, respectively, and were calculated using the following estimated assumptions:
Nine Months Ended
September 30,
  2021 2020
Expected term (years) 5.5 5.5
Risk free interest rate
0.4-1.4%
0.4-1.7%
Expected Volatility 109  % 81  %
Expected Dividends None None
As of September 30, 2021, there was approximately $11.4 million of unrecognized compensation cost related to unvested employee stock option awards outstanding, net of the impact of estimated forfeitures that is expected to be recognized as expense over a weighted average period of 2.27 years. The intrinsic value of employee stock options exercised during the nine months ended September 30, 2021 was $0.5 million. The intrinsic value of employee stock options exercised during the nine months ended September 30, 2020 was not material.
Restricted Stock Awards
The following table presents a summary of unvested restricted stock awards (“RSAs”) under the 2010 Plan as of September 30, 2021:
Number of
Shares 		Weighted
Average
Grant Date Fair Value
Unvested, December 31, 2020 20,624  $ 3.45 
Awarded —  — 
Vested (10,312) 3.45 
Forfeited —  — 
Unvested, September 30, 2021
10,312  $ 3.45 
As of September 30, 2021, there were 10,312 shares outstanding covered by RSAs that are expected to vest. The weighted average grant date fair value of these shares of restricted stock was $3.45 per share and the aggregate fair value of these shares of restricted stock was $0.1 million. As of September 30, 2021, there was less than $0.1 million of unrecognized compensation costs, net of estimated forfeitures, related to RSAs granted to officers, which are expected to be recognized as expense over a remaining weighted average period of 0.31 years.
Amended and Restated 2010 Employee Stock Purchase Plan
The Company has reserved 2,000,000 shares of common stock for issuance under the ESPP. Eligible employees may purchase shares of the Company’s common stock at 85% of the lower closing market price of the common stock at the beginning of the enrollment period or ending date of the purchase period within a two-year enrollment period, as defined. The Company has four six-month purchase periods per each two-year enrollment period. If, within any one of the four purchase periods in an enrollment period, the purchase period ending stock price is lower than the stock price at the beginning of the enrollment period, the two-year enrollment resets at the new lower stock price. This aspect of the plan was amended in 2017. Prior to 2017, the plan included two six-month purchase periods per year with no defined enrollment period. During the three months ended September 30, 2021, no shares were issued under the ESPP. During the nine months ended September 30, 2021, 20,791 shares were issued under the ESPP. As of September 30, 2021, there were 1,576,599 shares available for future purchase under the ESPP.
ESPP compensation expense for the three and nine months ended September 30, 2021 and 2020 was not material.
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Total Stock-Based Compensation Expense
For the three and nine months ended September 30, 2021 and 2020, the Company recorded stock-based compensation expense to the following line items in its costs and expenses section of the Condensed Consolidated Statements of Operations and Comprehensive Loss, including expense related to its ESPP:
  Three Months Ended
September 30, 		Nine Months Ended
September 30,
(in thousands) 2021 2020 2021 2020
Research and development expenses $ 553  $ 193  $ 1,331  $ 548 
General and administrative expenses 911  431  2,507  1,285 
Total stock-based compensation expense $ 1,464  $ 624  $ 3,838  $ 1,833 
12.     Loss Per Common Share
Basic and diluted loss per common share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is the same as basic net loss per common share for the three and nine months ended September 30, 2021 and 2020, because the effect of the potential common stock equivalents would be antidilutive due to the Company’s net loss position for these periods. Antidilutive securities consist of stock options outstanding of 10,298,279 and 9,128,896 as of September 30, 2021 and 2020, respectively.
13.     Related Party Transactions
(a)Agreement with Head of Research and Development - Robert E. Martell, M.D., Ph.D.
In October 2018, the Company entered into an exclusive option and license agreement with Epi-Cure Pharmaceuticals, Inc., (“Epi-Cure”) a privately held early stage biotechnology company. Robert E. Martell, M.D., Ph.D., the Company’s Head of Research and Development and a former director of the Company, is a founder of Epi-Cure, was formerly an officer and director of Epi-Cure, and is currently a holder of a convertible promissory note to Epi-Cure. Under the terms of the option and license agreement, Epi-Cure granted Curis an exclusive option to certain program compounds that may arise during the initial research and development period, and any extension thereof. Upon execution of the option and license agreement, the Company paid Epi-Cure an upfront payment of $0.1 million for legal and consulting costs incurred by Epi-Cure in connection with the transaction.
Under the terms of the agreement, Epi-Cure had primary responsibility for conducting research and development activities and Curis was responsible for funding up to $0.5 million of the research and development program costs and expenses during the initial research and development period. After the end of the research and development period, which ended in April 2020, Curis had sixty days to elect to exercise its option to license the program compounds. In June 2020, the Company decided not to exercise its option to license the program compounds, and the agreement expired.
In 2020, the Company expensed $0.1 million of fees related to this agreement. No expense has been incurred following the expiration of the agreement in June 2020.
Item 2.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the Condensed Consolidated Financial Statements and the related notes appearing elsewhere in this report. Some of the information contained in this discussion and analysis and set forth elsewhere in this report, including information with respect to our plans and strategy for our business, includes forward-looking statements, based on current expectations and related to future events and our future financial and operational performance, that involve risks and uncertainties. You should review the discussion above under the heading “Risk Factor Summary,” the risk factors detailed further in Item 1A, "Risk Factors" of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, and, if applicable, those included under Part II, Item 1A of this Quarterly Report on Form 10-Q, for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. As used throughout this report, the terms “the Company,” “we,” “us,” and “our” refer to the business of Curis, Inc. and its wholly owned subsidiaries, except where the context otherwise requires, and the term “Curis” refers to Curis, Inc.
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Overview
We are a biotechnology company focused on the development of first-in-class and innovative therapeutics for the treatment of cancer.
We conduct our research and development programs both internally and through strategic collaborations. Our clinical stage drug candidates are:
•CA-4948, an orally-available small molecule inhibitor of Interleukin-1 receptor-associated kinase 4, or IRAK4, which is currently undergoing testing in a Phase 1/2 open-label dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with Myeloid Differentiation Primary Response Protein 88, or MYD88 alterations. We reported preliminary clinical data from the study in December 2020. The trial was amended to include a combination study of CA-4948 and ibrutinib, a BTK inhibitor, in patients with non-Hodgkin lymphomas for which we enrolled the first patient in February 2021. We expect to provide initial data from the combination study in the first half of 2022. We are also conducting a separate Phase 1/2 open-label, single arm dose escalating and expansion trial in patients with acute myeloid leukemia, or AML, and myelodysplastic syndromes, or MDS, and announced preliminary clinical data from this study in December 2020. The study was amended in April 2021 to include dose escalation cohorts of CA-4948 in combination with azacitidine or venetoclax. In April 2021, CA-4948 was granted Orphan Drug Designation for the treatment of AML and MDS by the U.S. Food and Drug Administration, or FDA. In June 2021, we reported updated preliminary clinical data from the Phase 1/2 study in patients with AML or MDS and announced the recommended Phase 2 dose for monotherapy dose expansion.
•CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation, or VISTA signaling pathway. In June 2020, we announced the FDA had cleared our Investigational New Drug, or IND, application for CI-8993. In September 2020, we began enrollment in our Phase 1 trial of CI-8993 in patients with solid tumors. We have an option to license CI-8993 from ImmuNext, Inc., or ImmuNext.
Our pipeline also includes the following:
•Fimepinostat, a small molecule that potently inhibits the activity of histone deacetylase, or HDAC, and phosphotidyl-inositol 3 kinase, or PI3 kinase enzymes, which has been granted Orphan Drug Designation and Fast Track Designation for the treatment of diffuse large B-cell lymphoma, or DLBCL, and nuclear protein in testis (NUT) midline carcinoma by the FDA. In 2019, we 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, or HGBL. We reported preliminary clinical data from this combination study in December 2019. In March 2020, we announced that although we observed no significant drug-drug interaction in our Phase 1 study of fimepinostat in combination with venetoclax, we did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. We are currently evaluating future studies for fimepinostat.
•CA-170, a small molecule antagonist of VISTA and PDL1, for which we announced initial data from a clinical study in patients with mesothelioma in conjunction with the Society of Immunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. We are currently evaluating future studies for CA-170.
•CA-327, a small molecule antagonist of PDL1 and TIM3, which is a pre-IND stage oncology drug candidate.
We are party to a collaboration with Genentech Inc., or Genentech, a member of the Roche Group, under which F. Hoffmann-La Roche Ltd, or Roche, and Genentech are commercializing Erivedge® (vismodegib), a first-in-class orally administered small molecule Hedgehog signaling pathway antagonist. Erivedge is approved for the treatment of advanced basal cell carcinoma, or BCC.
In January 2015, we entered into an exclusive collaboration agreement focused on immuno-oncology and selected precision oncology targets with Aurigene Discovery Technologies Limited, or Aurigene, which was amended in September 2016 and February 2020. As of September 30, 2021, we have licensed four programs under the Aurigene collaboration:

1.IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948.
2.PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170.
3.PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327.
4.In March 2018, we exercised our option to license a fourth program, which is an immuno-oncology program.
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In addition, we are party to an option and license agreement with ImmuNext. Pursuant to the terms of the option and license agreement, we have an 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.
Based on our clinical development plans for our pipeline, we intend to predominantly focus our available resources on the continued development of CA-4948, in collaboration with Aurigene, and CI-8993, in collaboration with ImmuNext, in the near term.
Liquidity
Since our inception, we have funded our operations primarily through private and public placements of our equity securities, license fees, contingent cash payments, research and development funding from our corporate collaborators, debt financings and the monetization of certain royalty rights. We have never been profitable on an annual basis and have an accumulated deficit of $1.1 billion as of September 30, 2021. For the nine months ended September 30, 2021, we incurred a net loss of $31.8 million and used $29.4 million of cash in operations. We expect that our $149.8 million cash, cash equivalents and investments as of September 30, 2021 should enable us to maintain our planned operations into 2024. We have based this assessment on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
We will need to generate significant revenues to achieve profitability, and do not expect to achieve profitability in the foreseeable future, if at all. If sufficient funds are not available, we will have to delay, reduce the scope of, or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for or preventing the marketing of any of our product candidates, which could adversely affect our business prospects and our ability to continue our operations, and would have a negative impact on our financial condition and ability to pursue our business strategies. In addition, we 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 our assets or proprietary technologies or the sale of our company, but there can be no assurance that we would be able to enter into such a transaction or transactions on a timely basis or on terms favorable to us, or at all.
COVID-19 Pandemic
The COVID-19 pandemic has caused many governments to implement measures to slow the spread of the pandemic through quarantines, strict travel restrictions, heightened border scrutiny, and other measures. The pandemic and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce. While the COVID-19 pandemic has had adverse effects on our business and we expect the pandemic to have an adverse effect on our business, financial conditions and results of operations in the future, we are unable to predict the extent or nature of the future progression of the COVID-19 pandemic or its effects on our business and operations at this time.
We have enrolled, and will seek to enroll, cancer patients in clinical trials at sites located both in the United States and internationally. Many of our clinical trial sites have imposed restrictions as a result of the COVID-19 pandemic, which have had and may continue to have a negative impact on our ability to conduct our clinical trials. We have encountered and may continue to face difficulties recruiting and retaining patients in our ongoing and planned clinical trials to the extent patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the pandemic. In addition, we do not currently know the duration or to what degree medical facilities, including our clinical trial sites, will continue to be impacted by the pandemic. For example, all of our clinical trial sites for our ongoing Phase 1/2 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 have in some instances prohibited, and in other instances may potentially prohibit in the future, clinical trial monitors and patients from entering the trial sites. We are actively working with our clinical trial sites to follow FDA guidelines for conducting clinical trials during the COVID-19 pandemic, including performing remote monitoring to the extent possible and arranging for the shipment of medicine directly from the clinical trial site to patients who are enrolled in our trials, if required; however, there is no assurance such arrangements will be successful. As a result, further enrollment in our ongoing clinical trial for CA-4948 in patients with non-Hodgkin lymphomas, including those with MYD88 alterations, has been delayed and may continue to 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 our trial sites. As a result, enrollment in this trial has been slower than expected and the timeline of this trial has been delayed and may continue to be delayed. In addition, in July 2020, we commenced enrollment in our Phase 1 clinical trial of CA-4948 in patients with AML and MDS. Clinical trial sites for this study have also imposed and may continue to impose restrictions similar to those described above. As a result, we may not be able to enroll this trial on our planned timeline, which would cause a delay in the overall timeline for this trial. Similarly, enrollment in and the overall timeline of our combination study of CA-4948 and ibrutinib, for which we commenced enrollment
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in February 2021, and our Phase 1 clinical trial for CI-8993, for which we commenced enrollment in September 2020, have been delayed and may continue to be delayed due to the factors discussed above. To the extent clinical trial sites are slowed down or closed to enrollment in our ongoing and planned clinical trials, this could also have a material adverse impact on our clinical trial plans and timelines. These restrictions may also impact our ability to collect patient data in a timely fashion. In addition, we do not know whether and to what extent potential exposure to COVID-19 of patients in our clinical trials could impact the efficacy of CA-4948 or CI-8993. The response to the COVID-19 pandemic may redirect resources of regulators in a way that would adversely impact our ability to progress regulatory approvals. In addition, we may face impediments to regulatory meetings and approvals relating to our clinical trials due to measures intended to limit in-person interactions.

We and our collaborators, third-party contract manufacturers, contract research organizations and clinical sites may experience delays or disruptions in supply and release of product candidates and/or procuring items that are essential for our research and development activities, including, for example, raw materials used in the manufacturing of our product candidates, basic medical and laboratory supplies used in our clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages or supply chain disruptions as a result of the pandemic. While we believe that we currently have sufficient supply of our product candidates to continue our ongoing clinical trials, shortages and global supply chain disruptions could make it difficult to obtain, or cause us to be delayed in obtaining, some of our product candidates, or materials contained therein, especially when such materials come from facilities located in areas particularly impacted by COVID-19. 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 has had and could continue to have a negative impact on the amount and timing of any royalty revenue we may receive from Genentech related to Erivedge. There is no guarantee that the COVID-19 pandemic, or any potential future outbreak, would not impact our supply chain, which could have a material adverse impact on our clinical trial plans and business operations.
We experienced delays in closing down our clinical trial sites related to our fimepinostat and CA-170 trials due to restrictions on non-essential workers imposed at those sites in response to COVID-19, which delayed the winding down of these trials.
Any negative impact that the COVID-19 pandemic has on the ability of our suppliers to provide materials for our product candidates or on recruiting or retaining patients in our clinical trials could cause costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our financial results. Additionally, the pandemic has already caused significant disruptions in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds and has also impacted, and may continue to impact, the volatility of our stock price and trading in our stock. Moreover, the pandemic has significantly impacted economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business and it has had and may continue to have an adverse effect on our business, financial condition, results of operations, and prospects.
Key Drivers
We believe that near term key drivers to our success will include:
•our ability to successfully plan, finance and complete current and planned clinical trials for CA-4948 and CI-8993, as well as for such clinical trials to generate favorable data; and
•our ability to raise additional financing, when required, to fund operations.
In the longer term, a key driver to our success will be our ability, and the ability of any current or future collaborator or licensee, to successfully develop and commercialize drug candidates.
Our Collaborations and License Agreements
For information regarding our collaboration and license agreements, refer to Note 9, Research and Development Collaborations, in the accompanying Notes to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q and Note 11, Research and Development Collaborations, in Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2020 as filed with the Securities and Exchange Commission, or SEC, on March 16, 2021.
Financial Operations Overview

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General. Our future operating results will largely depend on the progress of drug candidates currently in our research and development pipeline. The results of our operations will vary significantly from year to year and quarter to quarter and depend on, among other factors, the cost and outcome of any preclinical development or clinical trials then being conducted. For a discussion of our liquidity and funding requirements, see “Liquidity” and “Liquidity and Capital Resources - Funding Requirements”.
Liability Related to the Sale of Future Royalties. In connection with the termination and repayment in full of our prior loan with HealthCare Royalty Partners, III, L.P., or HealthCare Royalty, we and Curis Royalty entered into the royalty interest purchase agreement, or Oberland Purchase Agreement, with entities managed by Oberland Capital Management, LLC, or the Purchasers. Upon closing of the Oberland Purchase Agreement, Curis Royalty received an upfront purchase price of $65.0 million from the Purchasers, approximately $33.8 million of which was used to pay off the remaining loan principal to HealthCare Royalty, and $3.7 million of which was used to pay transaction costs, including $3.4 million to HealthCare Royalty in accrued and unpaid interest and prepayment fees under the loan, resulting in net proceeds of $27.5 million. Curis Royalty will also be entitled to receive milestone payments of (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions, and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026, which milestone payments may each be paid, at the option of the Purchasers, in a lump sum in cash or out of the Purchaser’s portion of future payments under the Oberland Purchase Agreement. For a discussion of the Oberland Purchase Agreement, see “Liquidity and Capital Resources – Royalty Interest Purchase Agreement”.
Revenue. We do not expect to generate any revenues from our direct sale of products for several years, if ever. Substantially all of our revenues to date have been derived from license fees, research and development payments, and other amounts that we have received from our strategic collaborators and licensees, including royalty payments. Since the first quarter of 2012, we have recognized royalty revenues related to Genentech’s sales of Erivedge and we expect to continue to recognize royalty revenue in future quarters from Genentech’s sales of Erivedge in the U.S. and Roche’s sales of Erivedge outside of the U.S. However, a portion of our royalty and royalty-related revenues under our collaboration with Genentech will be paid to the Purchasers, pursuant to the Oberland Purchase Agreement. The Oberland Purchase Agreement will terminate upon the earlier to occur of (i) the date on which Curis Royalty’s rights to receive the Purchased Receivables owed by Genentech under the Genentech collaboration agreement have terminated in their entirety and (ii) the date on which payment in full of the put/call price is received by the Purchasers pursuant to the Purchasers’ exercise of their put option or Curis Royalty’s exercise of its call right. For additional information regarding the terms and termination provisions of this agreement, see Note 8, Liability Related to the Sale of Future Royalties, in the accompanying Notes to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.
We could receive additional milestone payments from Genentech, provided that contractually specified development and regulatory objectives are met. Also, we could receive milestone payments from the Purchasers, provided that contractually specified royalty payment amounts are met within applicable time periods. Our only source of revenues and/or cash flows from operations for the foreseeable future will be royalty payments that are contingent upon the continued commercialization of Erivedge under our collaboration with Genentech, and contingent cash payments for the achievement of clinical, development and regulatory objectives, if any, that are met, under our collaboration with Genentech. Our receipt of additional payments under our collaboration with Genentech cannot be assured, nor can we predict the timing of any such payments, as the case may be.
Cost of Royalty Revenues. Cost of royalty revenues consists of all expenses incurred that are associated with royalty revenues that we record as revenues in our Condensed Consolidated Statements of Operations and Comprehensive Loss. These costs currently consist of payments we are obligated to make to university licensors on royalties that Curis Royalty receives from Genentech on net sales of Erivedge. In all territories other than Australia, our obligation is equal to 5% of the royalty payments that we receive from Genentech for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012 in the U.S.
Research and Development. Research and development expense consists of costs incurred to develop our drug candidates. These expenses consist primarily of:
•salaries and related expenses for personnel, including stock-based compensation expense;
•costs of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations and consultants, among others;
• other outside service costs including costs of contract manufacturing;
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•sublicense payments;
•the costs of supplies and reagents;
•occupancy and depreciation charges;
•certain payments that we make under our collaboration agreements, including, for example, semi-annual payments, option exercise fees and milestone payments;
•payments that we are obligated to make to certain third-party university licensors upon our receipt of payments from Genentech related to the achievement of clinical development and regulatory objectives under our collaboration agreement; and
•internal and external costs of complying with the requirements of the FDA or another regulatory authority.
We expense research and development costs as incurred. We are currently incurring research and development costs under our Hedgehog signaling pathway antagonist collaboration with Genentech related to the maintenance of third-party licenses to certain background technologies.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we conduct our clinical trials of CA-4948 and CI-8993; prepare regulatory filings for our product candidates; continue to develop additional product candidates; and potentially advance our product candidates into later stages of clinical development.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
•our ability to successfully enroll our current and future clinical trials and our ability to initiate future clinical trials, which has been and may continue to be negatively impacted by the COVID-19 pandemic and responsive measures relating thereto;
•the scope, quality of data, rate of progress and cost of clinical trials and other research and development activities undertaken by us or our collaborators;
•the results of future preclinical studies and clinical trials;
•the cost and timing of regulatory approvals and maintaining compliance with regulatory requirements;
•the cost and timing of establishing sales, marketing and distribution capabilities;
•the cost of establishing clinical and commercial supplies of our drug candidates and any products that we may develop;
•the effect of competing technological and market developments; and
•the cost and effectiveness of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Any changes in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time to complete clinical development of that product candidate. We may never obtain regulatory approval for any of our product candidates. If we do obtain regulatory approval for our product candidates, drug commercialization will take several years and millions of dollars in development costs.
A further discussion of some of the risks and uncertainties associated with completing our research and development programs on schedule, or at all, and some consequences of failing to do so, are set forth under Item 1A, "Risk Factors" of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020.
General and Administrative. General and administrative expense consists primarily of salaries, stock-based compensation expense and other related costs for personnel in executive, finance, accounting, business development, legal, information technology, corporate communications and human resource functions. Other costs include facility costs not otherwise included
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in research and development expense, insurance, and professional fees for legal, patent and accounting services. Patent costs include certain patents covered under collaborations, a portion of which is reimbursed by collaborators and a portion of which is borne by us.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates and judgments include the carrying value of property and equipment and intangible assets, revenue recognition, the value of certain liabilities, debt classification and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
During the nine months ended September 30, 2021, there were no material changes to our critical accounting policies and estimates as reported in our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 16, 2021.
Results of Operations
Three and Nine Months Ended September 30, 2021 and September 30, 2020

The following table summarizes our results of operations for the three and nine months ended September 30, 2021 and 2020:
  For the Three Months Ended
September 30, 		Percentage
Increase
(Decrease) 		For the Nine Months Ended
September 30, 		Percentage
Increase
(Decrease)
  2021 2020 2021 2020
  (in thousands)   (in thousands)  
Revenues, net: $ 3,039  $ 2,742  11  % $ 7,514  $ 7,811  (4) %
Costs and expenses:
Cost of royalty revenues 151  135  12  % 376  382  (2) %
Research and development 8,602  4,705  83  % 24,112  17,459  38  %
General and administrative 4,334  2,613  66  % 12,524  8,593  46  %
Other expense, net 1,003  1,263  (21) % 2,318  3,768  (38) %
Net loss $ (11,051) $ (5,974) 85  % $ (31,816) $ (22,391) 42  %

Revenues. Total revenues are summarized as follows:
  For the Three Months Ended
September 30, 		Percentage
Increase
(Decrease) 		For the Nine Months Ended
September 30, 		Percentage
Increase
(Decrease)
  2021 2020 2021 2020
  (in thousands)   (in thousands)  
Revenues, net:
Royalties $ 3,058  $ 2,720  12  % $ 7,593  $ 7,681  (1) %
Other revenue —  —  100  % 1  211  (100) %
Contra revenue, net (19) 22  <(100)% (80) (81) (1) %
Total revenues, net $ 3,039  $ 2,742  11  % $ 7,514  $ 7,811  (4) %
Total revenues, net of $3.0 million increased by 11% for the three months ended September 30, 2021 as compared to the same period in 2020. The increase is driven by increased royalty revenues arising from Genentech and Roche’s net sales of Erivedge during the current year period as compared to the prior year period.
Total revenues, net of $7.5 million decreased by 4% for the nine months ended September 30, 2021 as compared to the same period in 2020. The decrease was primarily due to the inclusion of a milestone payment from an out-licensed technology that occurred in the first quarter of 2020 for which there was no such amount in 2021.
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Cost of Royalty Revenues. Cost of royalty revenues increased by 12% for the three months ended September 30, 2021 as compared to the same period in 2020, which is consistent with the increase in royalty revenue. Cost of royalty revenues decreased by 2% for the nine months ended September 30, 2021 as compared to the same period in 2020, which is consistent with the decrease in royalty revenue. We are obligated to make payments to two university licensors on royalties that Curis Royalty earns from Genentech on net sales of Erivedge.
Research and Development Expenses. The following table summarizes our research and development expenses incurred during the periods indicated: 
  For the Three Months Ended
September 30, 		Percentage
Increase
(Decrease) 		For the Nine Months Ended
September 30, 		Percentage
Increase
(Decrease)
  2021 2020 2021 2020
  (in thousands)   (in thousands)  
Direct research and development expenses $ 4,440  $ 2,853  56  % $ 14,181  $ 11,498  23  %
Employee related expenses 3,672  1,339  >100 % 8,523  4,496  90  %
Facilities, depreciation and other expenses 490  513  (4) % 1,408  1,465  (4) %
Total research and development expenses $ 8,602  $ 4,705  83  % $ 24,112  $ 17,459  38  %

Research and development expenses were $8.6 million for the three months ended September 30, 2021 as compared to $4.7 million in the same period in 2020, an increase of approximately $3.9 million, or 83%. Direct research and development expenses increased by $1.6 million for the three months ended September 30, 2021 as compared to the same period in 2020. The increase in direct research and development expenses for the quarter is primarily attributable to increased clinical and manufacturing costs for our programs. Additionally, employee related costs increased by $2.3 million, primarily attributable to increased stock compensation and personnel costs as a result of additional headcount.

Research and development expenses were $24.1 million for the nine months ended September 30, 2021 as compared to $17.5 million in the same period in 2020, an increase of approximately $6.7 million, or 38%. Direct research and development expenses increased by $2.7 million for the nine months ended September 30, 2021 as compared to the same period in 2020. The increase in direct research and development expenses for the quarter is primarily attributable to increased clinical and manufacturing costs for our programs. The increase in costs is offset by the upfront license fee expense from our option and license agreement with ImmuNext that occurred during the first quarter of 2020. Additionally, employee related costs increased by $4.0 million, primarily attributable to increased stock compensation and personnel costs as a result of additional headcount.

We expect that a majority of our research and development expenses for the foreseeable future will be incurred in connection with our efforts to advance our programs, including clinical and preclinical development costs, manufacturing, option exercise fees, and potential milestone payments upon achievement of certain milestones.
General and Administrative Expenses. General and administrative expenses are summarized as follows:
  For the Three Months Ended
September 30, 		Percentage
Increase
(Decrease) 		For the Nine Months Ended
September 30, 		Percentage
Increase
(Decrease)
  2021 2020 2021 2020
  (in thousands)   (in thousands)  
Personnel $ 1,472  $ 893  65  % $ 3,986  $ 3,002  33  %
Occupancy and depreciation 154  193  (20) % 453  538  (16) %
Legal services 399  336  19  % 1,832  1,751  5  %
Professional and consulting services 790  466  70  % 2,298  1,111  >100 %
Insurance costs 317  139  >100 % 620  359  73  %
Stock-based compensation 910  431  >100 % 2,507  1,286  95  %
Other general and administrative expenses 292  155  88  % 828  546  52  %
Total general and administrative expenses $ 4,334  $ 2,613  66  % $ 12,524  $ 8,593  46  %
General and administrative expenses were $4.3 million for the three months ended September 30, 2021, as compared to $2.6 million in the same period in 2020, an increase of $1.7 million, or 66%. The increase in general administrative expense was driven primarily by higher costs for stock-based compensation, personnel, and professional and consulting services during the three months ended September 30, 2021.
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General and administrative expenses were $12.5 million for the nine months ended September 30, 2021, as compared to $8.6 million in the same period in 2020, an increase of $3.9 million, or 46%. The increase in general administrative expense was driven primarily by higher costs for stock-based compensation, personnel, and professional and consulting services costs during the nine months ended September 30, 2021.
Other Expense. Other expense decreased by $0.3 million, or 21% for the three months ended September 30, 2021 as compared to the same period in 2020 primarily due to decreased imputed interest expense related to future royalty payments.
Other expense decreased by $1.5 million, or 38% for the nine months ended September 30, 2021 as compared to the same period in 2020 primarily due to the forgiveness of the PPP Loan in June 2021. See "Liquidity and Capital Resources - Debt Financing" for further discussion. The remaining net other expense for the nine months ended September 30, 2021 and September 30, 2020 primarily consisted of imputed interest expense related to future royalty payments.
Liquidity and Capital Resources
We have financed our operations primarily through private and public placements of our equity securities, license fees, contingent cash payments and research and development funding from our corporate collaborators, debt financings, and the monetization of certain royalty rights. See “Funding Requirements” and Note 1 to the Condensed Consolidated Financial Statements appearing in this Quarterly Report on Form 10-Q for a further discussion of our liquidity.
At September 30, 2021, our principal sources of liquidity consisted of cash, cash equivalents and investments of $149.8 million, excluding our restricted cash of $0.7 million. Our cash and cash equivalents are highly liquid investments with a maturity of three months or less at date of purchase. Our short and long-term investments primarily include commercial paper and securities. We maintain cash balances with financial institutions in excess of insured limits.
Common Stock Purchase Agreement
In February 2020, we entered into a common stock purchase agreement, or the Agreement, with Aspire Capital Fund, LLC, or Aspire Capital, for the sale of up to $30.0 million of our common stock. Under the terms of the Agreement, Aspire Capital has committed to purchase such shares of our common stock at our request, from time to time during a 30-month period at prices based on the market price at the time of each sale, subject to specified terms and limitations.
Aspire Capital made an initial investment of $3.0 million through the purchase of 2,693,965 shares of our common stock. In 2020, Aspire Capital subsequently purchased an additional 4,650,000 shares of our common stock for $5.4 million. In addition, as consideration for Aspire Capital’s obligation under the Agreement, we issued 646,551 shares of common stock to Aspire Capital as a commitment fee. We also entered into a registration rights agreement with Aspire Capital in connection with our entry into the Agreement in which we agreed to file with the SEC one or more registration statements, as necessary, and to the extent permissible and subject to certain exceptions, to register under the Securities Act, the sale of the shares of our common stock that have been and may be issued to Aspire Capital under the Agreement. As of September 30, 2021 and December 31, 2020, a total of $21.6 million remained available under the Agreement. The Company did not sell shares of common stock under the Agreement during the three and nine months ended September 30, 2021. For the three months ended September 30, 2020, 3,600,000 shares were sold representing net proceeds of $4.2 million. For the nine months ended September 30, 2020, 6,293,965 shares were sold representing net proceeds of $6.8 million.
Under the terms of the Agreement, we have the right to sell up to 150,000 shares of common stock per day to Aspire Capital, which total may be increased by mutual agreement up to an additional 2,000,000 shares per day. The extent to which we rely on Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources.
Pursuant to the Agreement, we will control the timing and amount of the further sale of our common stock to Aspire Capital. We plan to use the proceeds for general corporate purposes, including research and development, clinical trial activity and working capital. There are no restrictions on future financings and there are no financial covenants, participation rights, rights of first refusal, or penalties in the Agreement. We have the right to terminate the Agreement at any time without any additional cost or penalty.
Equity Offerings
In March 2020, we entered into a Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC, or JonesTrading, to sell from time to time up to $30.0 million of our common stock through an “at the market offering” program under which JonesTrading acted as sales agent. We terminated this sales agreement effective as of December 9, 2020. We did not incur any termination penalties as a result of the termination. As of the effective date of the termination of this sales agreement, we had sold an aggregate of 6,298,648 shares of common stock under the sales agreement for aggregate gross
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proceeds of $8.3 million and net proceeds of $7.9 million, after deducting commissions and offering expenses. The $21.7 million of common stock that remained unsold under this sales agreement at the time of termination is no longer available.
In June 2020, we entered into a securities purchase agreement with certain institutional investors, pursuant to which we issued and sold, in a registered direct offering, an aggregate of 14,000,000 shares of our common stock at a purchase price per share of $1.25, for aggregate gross proceeds of $17.5 million, before deducting fees of approximately $1.0 million paid to the placement agent and other offering expenses of approximately $0.5 million paid by us. JonesTrading acted as the exclusive placement agent for the transaction, and we offered the shares pursuant to our universal shelf registration statement on Form S-3, or the 2018 Shelf, which was filed with the SEC on May 3, 2018 and declared effective by the SEC on May 17, 2018 (File No. 333-224627), and a prospectus supplement thereunder.
In December 2020, we completed an underwritten public offering of 29,500,000 shares of our common stock, including 3,847,826 shares issued and sold upon the exercise in full of the underwriters’ option to purchase additional shares, at a public offering price of $5.75 per share, for aggregate gross proceeds of $169.6 million before deducting underwriting discounts and commissions and other offering expenses of $10.2 million. The securities in this transaction were offered pursuant to the 2018 Shelf and an additional registration statement on Form S-3 (File No. 333-251211) filed pursuant to Rule 462(b) which became automatically effective on December 9, 2020, and a prospectus supplement thereunder.
In March 2021, we entered into a Sales Agreement with Cantor Fitzgerald & Co., or Cantor, and JonesTrading to sell from time to time up to $100.0 million of our common stock through an “at the market offering” program under which Cantor and JonesTrading act as sales agents. To date, we have not made any sales of common stock pursuant to the sales agreement. The securities in this transaction were offered pursuant to an automatic shelf registration statement of securities on Form S-3ASR (File No. 333-254362) that was filed with the SEC on March 16, 2021.
Debt Financing
In April 2020, we entered into a promissory note evidencing an unsecured $0.9 million loan, or the PPP Loan, under the Paycheck Protection Program, or PPP, of the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act as administered by the U.S. Small Business Administration, or the SBA. The PPP Loan was made by Silicon Valley Bank and had a term of 24-months and an interest rate of 1%. Under the terms of the CARES Act and the Paycheck Protection Program Flexibility Act of 2020, PPP Loan recipients can apply for and be granted forgiveness for all or a portion of loans granted under the PPP. We applied for such forgiveness in 2020 and received notification in June 2021 that the SBA had forgiven the PPP Loan in full, including interest accrued on the PPP Loan. During the nine months ended September 30, 2021, the Company recorded a gain of $0.9 million to Other income (expense), net for extinguishment of the debt.
Royalty Interest Purchase Agreement
In March 2019, we and Curis Royalty entered into the Oberland Purchase Agreement with the Purchasers. We sold to the Purchasers a portion of our rights to receive royalties from Genentech on potential net sales of Erivedge.

As upfront consideration for the purchase of the royalty rights, at closing the Purchasers paid to Curis Royalty $65.0 million less certain transaction expenses. Curis Royalty will also be entitled to receive up to approximately $70.7 million in milestone payments based on sales of Erivedge as follows: (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026. For further discussion please refer to Note 8, Liability Related to the Sale of Future Royalties, in the accompanying Notes to the Condensed Consolidated Financial Statements included in Item 1 of Part I of this Quarterly Report on Form 10-Q.
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Milestone Payments and Monetization of Royalty Rights
We have received aggregate milestone payments totaling $59.0 million under our collaboration with Genentech since 2012. In addition, we began receiving royalty revenues in 2012 in connection with Genentech’s sales of Erivedge in the U.S. and Roche’s sales of Erivedge outside of the U.S. Erivedge royalty revenues received after December 2012 have been used to repay Curis Royalty’s outstanding principal and interest under the loans due to BioPharma-II and HealthCare Royalty. A portion of Erivedge royalty and royalty-related revenue payments will be paid to the Purchasers pursuant to the Oberland Purchase Agreement. We also remain entitled to receive any contingent payments upon achievement of clinical development objectives and royalty payments related to sales of Erivedge pursuant to our collaboration agreement with Genentech and certain contingent payments upon achievement of contractually specified royalty revenue payment amounts related to sales of Erivedge pursuant to the Oberland Purchase Agreement. Upon receipt of any such payments, as well as on royalties received in any territory other than Australia, we are required to make payments to certain university licensors totaling 5% of these amounts. In addition, for royalties that Curis Royalty receives from Roche’s sales of Erivedge in Australia, we were obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia until the expiration of the patent in April 2019. After April 2019, the amount we are obligated to pay in Australia decreased to 5% of the royalty payments that Curis Royalty receives from Genentech.
Cash Flows
Cash flows for operations have primarily been used for salaries and wages for our employees, facility and facility-related costs for our office and laboratory, fees paid in connection with preclinical and clinical studies, laboratory supplies, consulting fees and legal fees. We expect that costs associated with clinical studies will increase in future periods.
Net cash used in operating activities of $29.4 million during the nine months ended September 30, 2021 was primarily the result of our net loss for the period of $31.8 million, offset by non-cash charges consisting of stock-based compensation, loan forgiveness, non-cash lease expense, depreciation, and non-cash imputed interest totaling $4.7 million. Accounts payable, accrued expenses and operating lease liability decreased by $0.6 million and prepaid expenses and other assets increased by $1.9 million. These changes increased cash utilization. Accounts receivable decreased $0.1 million and reduced cash utilization. We recognized a gain of $0.9 million on the forgiveness of the PPP Loan.
Net cash used in operating activities of $20.0 million during the nine months ended September 30, 2020 was primarily the result of our net loss for the period of $22.4 million, offset by non-cash charges consisting of stock-based compensation, amortization of debt issuance costs, non-cash lease expense, depreciation, and non-cash imputed interest totaling $2.5 million. Accounts payable and accrued and other liabilities increased $0.7 million, and accounts receivable decreased $0.5 million related to a decrease in Erivedge royalties. Prepaid expenses and other assets decreased $0.9 million.
We expect to continue to use cash in operations as we seek to advance our drug candidates and our programs under our collaboration agreements with Aurigene and ImmuNext. In addition, in the future we may owe royalties and other contingent payments to our licensors based on the achievement of developmental milestones, product sales and other specified objectives.
Investing activities used cash of $44.4 million and provided cash of $4.4 million for the nine months ended September 30, 2021 and 2020, respectively, resulting primarily from net investment activity from purchases and sales or maturities of investments for the respective periods.
Financing activities used cash of $2.9 million for the nine months ended September 30, 2021, primarily due to the payment of our liability under the Oberland Purchase Agreement.
Financing activities provided cash of $23.6 million for the nine months ended September 30, 2020, as a result of the proceeds from our registered direct offering in June 2020, our sales to Aspire Capital pursuant to our common stock purchase agreement, our at-the-market sales pursuant to our Sales Agreement with JonesTrading, and our PPP Loan, partially offset by the payment of our liability under the Oberland Purchase Agreement.
We have historically derived a portion of our operating cash flow from our receipt of milestone payments under collaboration agreements with third parties. However, we cannot predict whether we will receive additional milestone payments under existing or future collaborations.
Funding Requirements
We have incurred significant losses since our inception. As of September 30, 2021, we had an accumulated deficit of approximately $1.1 billion. We will require substantial funds to continue our research and development programs and to fulfill our planned operating goals. Our planned operating and capital requirements currently include the support of our current and future research and development activities for CA-4948 and CI-8993 as well as development candidates we have and continue to license under our collaborations with Aurigene and ImmuNext. We will require substantial additional capital to fund the
35
further development of these programs, as well as to fund our general and administrative costs and expenses. Moreover, our agreements with collaborators impose significant potential financial obligations on us. For example, under our collaboration, license and option agreement with Aurigene, we are required to make milestone, royalty and option fee payments for discovery, research and preclinical development programs that will be performed by Aurigene, which impose significant potential financial obligations on us. In addition, if we choose to exercise our option under the option and license agreement with ImmuNext, or the ImmuNext Agreement, we will be required to make milestone, royalty, and option fee payments in connection with the development of CI-8993.
Based upon our current operating plan, we believe that our existing cash, cash equivalents and investments of $149.8 million as of September 30, 2021, should enable us to fund our operating expenses and capital expenditure requirements into 2024. We have based this assessment on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. We will need to raise additional capital or incur indebtedness to continue to fund our operations in the future. Our ability to raise additional funds will depend on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us. If necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying the time to market for, or preventing the marketing of, any of our product candidates, which could adversely affect our business prospects, and we may be unable to continue our operations.
Furthermore, there are a number of factors that may affect our future capital requirements and further accelerate our need for additional working capital, many of which are outside our control, including the following:
•unanticipated costs in our research and development programs;
•the timing and cost of obtaining regulatory approvals for our drug candidates and maintaining compliance with regulatory requirements;
•payments due to licensors, including Aurigene and ImmuNext if we exercise our option under the ImmuNext Agreement, for patent rights and technology used in our drug development programs;
•the costs of commercialization activities for any of our drug candidates that receive marketing approval, to the extent such costs are our responsibility, including the costs and timing of establishing drug sales, marketing, distribution and manufacturing capabilities;
•unplanned costs to prepare, file, prosecute, defend and enforce patent claims and other patent-related costs, including litigation costs and technology license fees;
•unexpected losses in our cash investments or an inability to otherwise liquidate our cash investments due to unfavorable conditions in the capital markets; and
•impacts resulting from the COVID-19 pandemic and responsive actions relating thereto.
To become and remain profitable, we, either alone or with collaborators, must develop and eventually commercialize one or more drug candidates with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our drug candidates, obtaining marketing approval for these drug candidates, manufacturing, marketing and selling those drugs for which we may obtain marketing approval and satisfying any post marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. Other than Erivedge, which is being commercialized by Genentech and Roche, our most advanced drug candidates are currently only in early clinical testing.
For the foreseeable future, we will need to spend significant capital in an effort to develop and commercialize products and we expect to incur substantial operating losses. Our failure to become and remain profitable would, among other things, depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our research and development programs or continue our operations.
New Accounting Pronouncements
For detailed information regarding recently issued accounting pronouncements and the expected impact on our Condensed Consolidated Financial Statements, see Note 2g, New Accounting Pronouncements, in the accompanying Notes to Condensed Consolidated Financial Statements included in Item 1 of Part I of this Form 10-Q.
Contractual Obligations

There have been no material changes to our contractual obligations set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations” in our Annual Report on Form 10-K for the year ended December 31, 2020.
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Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of September 30, 2021.
Item 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.
Item 4.    CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls & Procedures
Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of September 30, 2021, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the three months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION 
Item 1A.    RISK FACTORS
We are subject to a number of risks that could materially and adversely affect our business, financial condition, and results of operations and future prospects, including those identified in Item 1A., “Risk Factors” of Part I of our Annual Report on Form 10-K for the year ended December 31, 2020, which was filed with the SEC on March 16, 2021.

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Item 6.    Exhibits
Exhibit
Number 		Description
3.1
31.1 *
31.2 *
32.1 *
32.2 *
101.INS * InLine XBRL Instance Document
101.SCH * InLine XBRL Taxonomy Extension Schema Document
101.CAL * InLine XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF * InLine XBRL Taxonomy Extension Definition Linkbase Document
101.LAB * InLine XBRL Taxonomy Extension Label Linkbase Document
101.PRE * InLine XBRL Taxonomy Extension Presentation Linkbase Document
104 Cover Page Interactive Data File

* Filed herewith
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
CURIS, INC.
Dated: November 9, 2021 By: /S/ JAMES E. DENTZER
James E. Dentzer
President and Chief Executive Officer
(Principal Executive Officer)
CURIS, INC.
By: /S/ WILLIAM STEINKRAUSS
William Steinkrauss
Chief Financial Officer
(Principal Financial and Accounting Officer)
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