Pulling down a $30 million loan against Erivedge royalties and spending $9.5 million to license a Phase II-ready apoptosis promoter from Genentech Inc. – its partner for the skin cancer product – gives Curis Inc. more financial runway, as well as worldwide rights to another promising oncology candidate.

An investment fund managed by Pharmakon Advisors is handling the debt transaction, which is entirely secured with royalties down the road from Erivedge (vismodegib), the Hedgehog inhibitor partnered with South San Francisco-based Genentech, and approved in January for advanced basal cell carcinoma (BCC). (See BioWorld Today, Jan. 31, 2012.)

The annual interest rate on the loan is 12.25 percent. Michael Gray, chief operating officer and chief financial officer of Curis, spoke Wednesday at the Piper Jaffray Healthcare Conference in New York. "An interesting component [of the loan arrangement] is that there are quarterly caps" on payback to Pharmakon, he said.

"Roche doesn't provide guidance, Genentech doesn't provide guidance and we don't provide guidance, but if you look at some of the analysts' expectations, the sales figures that would have to be achieved to hit those caps or exceed those caps are really pretty modest, in our view," Gray said.

Specifically, payback amounts are capped at $1 million per quarter in 2013, $2 million per quarter in 2014, and $3 million per quarter in 2015. Curis, which ended the third quarter of this year with $41.9 million in cash, figures the debt will be satisfied in four years.

Erivedge sales show "a positive trend but [are] definitely taking time," with Genentech reporting $19 million in sales so far this year, Gray said. "If you look at year one, we have $4 million in royalties to hit the [payback] cap, that translates to about $80 million in Erivedge sales," which should be achievable, he said.

"The debt is actually held by a wholly owned subsidiary," Gray noted. "If Erivedge sales are less than whatever the caps are, Pharmakon has no ability to come to Curis for [payment]."

About 28,000 BCC patients exist in the U.S., and Curis gets a mid- to upper-single-digit royalty that is tiered, based on global sales. It starts at 5 percent. Gray said only "a handful of hundreds of patients have been treated so far. Even getting a reasonably small penetration [into the remaining market] can make this a very commercially viable product."

'Busy Morning, Milestone Year'

Separately, Curis is paying Genentech, a unit of Roche AG, $9.5 million up front for worldwide rights to small molecule GDC-0917, designed to promote cancer cell death by antagonizing inhibitors of apoptosis proteins.

The compound, which Lexington, Mass.-based Curis has renamed CUDC-427, already has been tested in a 47-patient Phase I study to determine the maximum tolerated dose, how much to give in Phase II trials, pharmacokinetics, safety and tolerability. Secondary endpoints included a look at antitumor activity and potentially useful biomarkers.

Results of that study will not be unveiled until a scientific meeting that takes place in mid-2013, Curis said. The American Society of Clinical Oncology meeting is slated for May 31 to June 4 next year in Chicago.

Under the terms, Genentech could get an undisclosed milestone payment upon the first commercial sale of CUDC-427 in specified territories, and stands to collect royalties. Curis plans to continue the development of the compound as a single agent and as a potential combination therapy.

While CUDC-427 moves ahead thanks to new Pharmakon money, Genentech is testing Erivedge in a Phase II experiment with patients who have operable forms of BCC. That study opened for enrollment in October 2010. Genentech and Curis began their Hedgehog deal in the summer of 2003. (See BioWorld Today, June 12, 2003.)

As part of its business update, Curis said oral CUDC-101's Phase I escalation study will be stopped because bioavailability has proven too low. The small molecule designed to inhibit histone deacetylase, epidermal growth factor receptor and epidermal growth factor receptor 2, is continuing in a Phase I/II study testing its worth against human papillomavirus-negative locally advanced head and neck cancer. There, it's combined with radiation and cisplatin.

Also, the FDA accepted the investigational new drug application for CUDC-907, an oral dual HDAC/PI3K inhibitor due to enter a 21-day dose-escalation Phase I trial early next year in relapsed/refractory lymphoma and multiple myeloma patients.

"PI3K is a hot cancer target and we see the potential for Curis to sign a lucrative partnership," wrote Piper Jaffray analyst Edward Tenthoff in a research report. At the conference, Tenthoff introduced Gray, noting that Curis had "a very busy morning in a milestone year."

The company also has a partnership that began in 2009 with Debiopharm Group, of Lausanne, Switzerland, and in August began treating patients in the HALO Phase I/II study of the oral heat-shock protein 90 inhibitor Debio 0932. Debiopharm is testing the drug when combined with chemotherapy regimens in patients with advanced stages of non-small-cell lung cancer. As the HALO trial continues, Debiopharm plans to start a Phase I/II study with the same compound, in combination with Afinitor (everolimus, Novartis AG), against renal cell carcinoma.

Curis' stock (NASDAQ:CRIS) closed Wednesday at $3.35, down 4 cents.