Curis Inc
Annual Report 2017

Plain-text annual report

Morningstar® Document Research℠ FORM 10-KCURIS INC - CRISFiled: March 08, 2018 (period: December 31, 2017)Annual report with a comprehensive overview of the companyThe information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The userassumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot belimited or excluded by applicable law. Past financial performance is no guarantee of future results. UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549________________________________FORM 10-K(Mark one)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2017OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934Commission File Number 000-30347________________________________CURIS, INC.(Exact Name of Registrant as Specified in Its Charter)DELAWARE04-3505116(State or other jurisdiction ofincorporation or organization)(I.R.S. EmployerIdentification No.)4 Maguire RoadLexington, Massachusetts 02421(Address of principal executive offices) (Zip Code)617-503-6500(Registrant’s telephone number, including area code)________________________________Securities registered pursuant to Section 12(b) of the Act:Title of Each ClassName of Each Exchange on Which RegisteredCommon Stock, $0.01 par value per shareNASDAQ Global MarketSecurities registered pursuant to Section 12(g) of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate 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 1934during 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 filingrequirements for the past 90 days. x Yes ¨ NoIndicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). x Yes ¨ No1Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to thebest of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, oran emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”, and "emerging growthcompany" in Rule 12b-2 of the Exchange Act.Large accelerated filer ¨Accelerated filer x Non-accelerated filer ¨Smaller reporting company ¨(Do not check if a 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 anynew 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 Act). Yes ¨ No xThe aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (without admitting that any person whose shares arenot included in such calculation is an affiliate) based on the last reported sale price of the common stock on June 30, 2017 was approximately $146.6million.As of March 2, 2018, there were 165,628,371 shares of the registrant’s common stock outstanding.DOCUMENTS INCORPORATED BY REFERENCESpecified portions of the registrant’s proxy statement for the annual meeting of stockholders scheduled to be held on May 15, 2018, which are to be filedwith the Commission not later than 120 days after the close of the Registrant’s fiscal year ended December 31, 2017 pursuant to Regulation 14A, have beenincorporated by reference in Items 10-14 of Part III of this Annual Report on Form 10-K. 2Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCURIS, INC.TABLE OF CONTENTSForm 10-K PART I ITEM 1.BUSINESS4 ITEM 1A.RISK FACTORS32 ITEM 1B.UNRESOLVED STAFF COMMENTS64 ITEM 2.PROPERTIES64 ITEM 3.LEGAL PROCEEDINGS65 ITEM 4.MINE SAFETY DISCLOSURES65 PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASESOF EQUITY SECURITIES66 ITEM 6.SELECTED FINANCIAL DATA67 ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS87 ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK87 ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA87 ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE117 ITEM 9A.CONTROLS AND PROCEDURES117 ITEM 9B.OTHER INFORMATION117 PART III ITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE117 ITEM 11.EXECUTIVE COMPENSATION117 ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS118 ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE118 ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES118 PART IV ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES118 ITEM 16.FORM 10-K SUMMARY125 SIGNATURES1253Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART ICautionary Note Regarding Forward-Looking StatementsThis annual report on Form 10-K contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of1995, which involve risks and uncertainties. All statements other than statements of historical fact contained in this report are statements that could bedeemed forward-looking statements, including without limitation any expectations of revenue, expenses, earnings or losses from operations, or otherfinancial results; statements with respect to the plans, strategies and objectives of management for future operations; statements concerning productresearch, development and commercialization plans, timelines and anticipated results; statements of expectation or belief; and statements of assumptionsunderlying any of the foregoing. Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”,“plans”, “seeks” and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not allforward-looking statements contain these identifying words. Because forward-looking statements relate to the future, they are subject to inherentuncertainties, risks and changes in circumstances that are difficult to predict. Our actual results could differ materially from those anticipated in theseforward-looking statements as a result of various factors. These statements involve known and unknown risks, uncertainties and other factors that maycause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or impliedby the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. Important factors that could causeactual results to differ materially from those in these forward-looking statements are discussed, among other places, in Item 1A., “Risk Factors” of Part Iand Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of this report and in our Securities andExchange Commission reports filed after this report.The forward-looking statements included in this annual report represent our estimates as of the filing date of this annual report. We specificallydisclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon asrepresenting our estimates or views as of any date subsequent to the date of this annual report.Unless otherwise indicated, or unless the context of the discussion requires otherwise, we use the terms “we,” “us,” “our” and similar references torefer to Curis, Inc. and its subsidiaries, on a consolidated basis. We use the terms “Curis” to refer to Curis, Inc. on a stand-alone basis. ITEM 1.BUSINESSOverviewWe are a biotechnology company seeking to develop and commercialize innovative and effective drug candidates for the treatment of human cancers.Our clinical stage drug candidates are CUDC-907, which we are investigating in a Phase 2 clinical trial in patients with MYC-altered diffuse large B-celllymphoma and solid tumors, CA-170, for which we are currently conducting a Phase 1 study in patients with advanced solid tumors and lymphomas, and CA-4948, for which, in January 2018 we initiated a Phase 1 trial in patients with advanced non-Hodgkin lymphomas, including those with the myeloiddifferentiation primary response 88, or MYD88 alterations.Our pipeline also includes CA-327, which is a pre-IND stage oncology drug candidate. We expect to file an IND application with the United StatesFood and Drug Administration, or FDA, for clinical testing of CA-327 in 2018. In March 2018, we exercised our option to license a fourth program, which isan immuno-oncology program, from our collaboration partner Aurigene.Further, we are party to a collaboration with F. Hoffmann-La Roche Ltd, or Roche, and Genentech Inc., or Genentech, a member of the Roche Group,under which Roche and Genentech are commercializing Erivedge, a first-in-class orally-administered small molecule Hedgehog signaling pathway inhibitor.Erivedge® (vismodegib) is approved for the treatment of advanced basal cell carcinoma, or BCC.We are party to a collaboration agreement focused on immuno-oncology and selected precision oncology targets with Aurigene DiscoveryTechnologies Limited, or Aurigene, a specialized, discovery-stage biotechnology company and wholly-owned subsidiary of Dr. Reddy’s Laboratories. As ofDecember 31, 2017, we have licensed three programs under the Aurigene collaboration, and we licensed the fourth program in March 2018.Product Development ProgramsWe are seeking to develop and commercialize innovative drug candidates to treat cancer. Our product development initiatives, described in the tablebelow, are being pursued using our internal resources or through our collaborations.4Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Since our inception in 2000, substantially all of our revenues have been derived from collaborations and other agreements with third parties. For theyears ended December 31, 2017, 2016 and 2015, milestone and royalty payments from Genentech accounted for $9.8 million, or 99%, $7.5 million, or 100%,and $8.0 million, or 100%, respectively, of our revenue, all of which was related to the development and commercialization of Erivedge.CUDC-907CUDC-907 was invented by Curis scientists and is an oral, dual inhibitor of HDAC and PI3K enzymes. Specifically, CUDC-907 inhibits HDACs 1, 2, 3,6 and 10 and PI3K-alpha, delta and beta isoforms. Inhibitors of HDAC enzymes can affect a number of cell functions and cancer cell viability by regulatingthe acetylation of both histone and non-histone substrates. Multiple inhibitors of HDACs have been approved by the FDA for treatment of hematologicmalignancies. PI3 kinases are frequently activated through mutations or by receptor tyrosine kinases in many cancer types. Two PI3K inhibitors are currentlyapproved by the FDA for treatment of patients with B cell malignancies. CUDC-907 has shown potent antitumor activity in a variety of hematologic tumormodels such as non-Hodgkin’s lymphoma, including some with alterations in MYC oncogene, and multiple myeloma.Non-clinical results indicate that at the mechanistic level, CUDC-907 effectively downregulates MYC protein levels in MYC-altered and MYC-dependent cells and tumor models, consistent with the roles of HDAC and PI3K in MYC regulation. These results provide a mechanistic rationale for theclinical development of CUDC-907 in MYC-driven malignancies.Clinical development of CUDC-907 began in January 2013. Based on examination of multiple dose and schedules of administration in the Phase 1trial, the recommended dose of CUDC-907 was determined to be once daily oral administration of 60 mg dose using a 5 days “on”/2 days “off” schedule in21-day cycles. The most common drug related adverse events, or AEs, reported in the Phase 1 trial were low grade, meaning Grade 1 and 2, diarrhea, fatigueand nausea. Dose limiting toxicities, or DLTs, have consisted of diarrhea and hyperglycemia, however no DLTs occurred at the recommended dose andschedule. Other drug-related Grade 3 or Grade 4 AEs reported in three or more patients included thrombocytopenia and neutrophil decrease, which arehematologic AEs, as well as diarrhea, hyperglycemia and fatigue, which are non-hematologic AEs. In the expansion stage of the Phase 1 trial, CUDC-907 wastested as monotherapy or in combination with rituximab in patients with relapsed or refractory DLBCL, a type of non-Hodgkin’s Lymphoma.The Phase 2 study of monotherapy CUDC-907 in patients with relapsed or refractory DLBCL, including those whose tumor harbors alterations of theMYC oncogene is ongoing, and is designed to enroll up to 100 patients with DLBCL with MYC alteration. Study objectives include measurement ofobjective response rate, progression-free survival, overall survival, duration of response, incidence and severity of adverse events and other safety parameters,and characterization of the pharmacokinetics of CUDC-907.5Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsData from the two clinical studies with CUDC-907 have resulted in a number of patients with relapsed or refractory DLBCL (3rd line or later) achievingdurable complete and partial responses. Overall, based on the combined results from a Phase 1 trial and interim analysis of the Phase 2 study, the objectiveresponse rate (ORR) in the MYC-altered patients was 14/60 (23%). These responses appear to be durable with a median duration of response of 13.6 months,with many of the patients currently continuing on treatment. In comparison, based on the same combined results from the Phase 1 trial and Phase 2 interimanalysis, the ORR was 3/22 (13.6%) with median duration 9.1 months for MYC negative patients in these studies. An additional set of patients who hadincomplete MYC testing, with only negative results if any, were considered MYC unknown had an ORR of 2/23 (8.7%) with response duration of 10.8months.The preponderance of data from historical non-Curis sponsored studies suggest that MYC-altered disease confers a negative prognosis in newlydiagnosed patients with DLBCL as reflected by progression free survival and overall survival (OS). Patients with relapse and MYC-altered disease have aninferior outcome to any chemotherapy and to stem cell transplant. This poor prognosis conferred by MYC alteration is relevant in front-line, relapsed andrelapsed/refractory stage of treatment and even after stem cell transplantation. Based on the most recent published and largest dataset for relapsed/refractorystage MYC-altered DLBCL patients, the two-year OS of this population is 0% as compared to 29.9% in their non-MYC-altered counterparts.In light of substantial unmet need for more effective therapies, in April 2015 the FDA granted CUDC-907-orphan drug designation for the treatment ofDLBCL.We are currently in discussion with the FDA regarding the clinical benefit provided for the population of patients with relapsed/refractory DLBCLwhose tumors are shown to be MYC altered. Upon completion of these discussions, we expect feedback from the FDA which we will use to determine themost appropriate regulatory path for the treatment of this patient population with CUDC-907.We are also examining CUDC-907 in a second, ongoing Phase 1 trial that is designed to investigate its activity in patients with advanced solid tumorswith MYC involvement, including patients with NUT Midline Carcinoma.We are party to an agreement with The Leukemia and Lymphoma Society, or LLS, dated November 2011, and as amended in August 2015. We agreedto make up to $1.7 million in future payments to LLS, which equals the aggregate payments previously received from LLS under the November 2011agreement, pursuant to the achievement of certain objectives, including a licensing, sale, or other similar transaction, as well as regulatory and commercialobjectives, in each case related to the CUDC-907 program in hematological malignancies. However, if CUDC-907 does not continue to meet its clinicalsafety endpoints in future clinical trials in the defined field, or fails to obtain necessary regulatory approvals, all funding provided to us by LLS will beconsidered a non-refundable grant.CA-170CA-170 is an oral small molecule drug candidate that is designed to selectively target PDL1 and VISTA immune checkpoint proteins, both of whichindependently function as negative regulators of immune activation. CA-170 is being developed by us under our collaboration with Aurigene.CA-170 can potently rescue effector functions of T cells, such as cytokine secretion and proliferation, which are inhibited in the presence of PDL1/L2and VISTA checkpoint proteins. CA-170 has demonstrated high selectivity, and is unable to rescue T cells functions in the presence of other checkpointprotein molecules such as TIM3, CTLA4, LAG-3 and BTLA. Additionally, in multiple syngeneic mouse tumor models (such as melanoma and colon cancer),oral administration of CA-170 was demonstrated to result in anti-tumor activity but no such activity was observed in immune deficient mice, suggesting thatthe in vivo anti-cancer effects of CA-170 require an intact immune system.In June 2016, we dosed the first patient in a Phase 1 trial of CA-170 being conducted in patients with solid tumors and lymphomas. In November 2017,we presented preliminary clinical data from the ongoing dose escalation stage of CA-170's Phase 1 trial at the Society for Immunotherapy of Cancer, or SITC,Meeting. The data demonstrated that similar to the preclinical findings, CA-170 has a dose proportional and predictable PK profile in patients treated orallyat various doses in the ongoing dose escalation stage of the study. Additionally, evaluation of patient blood samples demonstrated that CA-170 appears to bebiologically active in modulating the immune system, with a several-fold increase in percentage of circulating CD8+ T cells expressing activation markerswithin 24 hours of oral dosing. As compared to pre-dosing, there was a marked increase in the population of CD8+ T cells detected in the post-treatmenttumor biopsy samples in multiple patients. The data presented also demonstrated that multiple patients experienced tumor shrinkages, including two patientswith non-small cell lung cancer, and one patient each with melanoma, squamous carcinoma of the head and neck, and Hodgkin lymphoma. CA-170 was welltolerated up to the highest dose tested, 800 mg once daily oral administration, as of December 2017.6Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur collaboration partner, Aurigene, initiated a Phase 2 trial for CA-170 in India in the first quarter of 2018.CA-4948CA-4948 is an oral small molecule drug candidate that is designed to inhibit the IRAK4 kinase, which is an important transducer of toll-like receptor orcertain interleukin receptor signaling pathways. These signaling pathways are shown to be involved in certain human cancers and inflammatory diseases.CA-4948 is a potent inhibitor of IRAK4 in biochemical and cell-based assays, as well as in an in vivo tumor model of diffuse large B cell lymphoma thatharbors mutation in the IRAK4 pathway. Lead compounds from this program were also shown to be effective in an in vivo preclinical model of acuteinflammation, suggesting that CA-4948 and other program compounds have the potential for use in the treatment of cancer and inflammatory diseases. CA-4948 has been shown to beactive in in vivo xenograft models of human lymphoma, and demonstrates activity in ex-vivo models of AML and MDS. We filed an IND application for CA-4948 in the third quarter of 2017 and dosed the first patient in a Phase 1 study in patients with relapsed or refractory non-Hodgkin lymphoma in January2018.CA-327In October 2016, we exercised our option within the collaboration with Aurigene to license the PDL1/TIM3 program. CA-327 is the developmentcandidate from this program and is currently undergoing IND-enabling studies. CA-327 is an oral small molecule drug candidate that is designed toselectively target PDL1 and TIM3 immune checkpoint proteins, both of which independently function as negative regulators of immune activation. CA-327has demonstrated anti-tumor activity in multiple syngeneic mouse tumor models in an immune-dependent manner. We expect to complete preclinical andtoxicology studies to file an IND application for CA-327 in 2018.For a further discussion of our collaboration agreement with Aurigene, see “Business—Our Collaborations and License Agreements—Aurigene.”ErivedgeErivedge® is an orally bioavailable small molecule which is designed to selectively inhibit the Hedgehog signaling pathway by targeting a proteincalled Smoothened. The Hedgehog signaling pathway is normally active during embryonic development and unregulated activation of the pathway isbelieved to play a central role in allowing the proliferation and survival of cancer cells and leading to formation and maintenance of certain cancers. Geneticmutations that lead to unregulated activation of Hedgehog signaling are found in BCC and medulloblastoma. Aberrant signaling in the Hedgehog signalingpathway is implicated in over 90% of BCC cases.Erivedge is FDA approved for treatment of adults with metastatic basal cell carcinoma, or with locally advanced basal cell carcinoma that has recurredfollowing surgery or who are not candidates for surgery, and who are not candidates for radiation and is being developed under a collaboration agreementwith Genentech. Genentech and Roche are responsible for the clinical development and global commercialization of Erivedge. Erivedge is currentlymarketed and sold in the U.S. by Genentech and in the European Union, Australia and several other countries by Roche.For a further discussion of our Hedgehog collaboration agreement with Genentech, see “Business—Our Collaborations and License Agreements —Genentech.”Our Collaborations and License AgreementsAurigeneIn January 2015, we entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of smallmolecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigene granted us anoption to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certainof such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene.In connection with the collaboration agreement, we issued to Aurigene 17,120,131 shares of our common stock valued at $24.3 million at the time ofissuance in partial consideration for the rights granted to us under the collaboration agreement. The shares were issued pursuant to a stock purchaseagreement with Aurigene dated January 18, 2015.In September 2016, we and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, in exchange for theissuance by us to Aurigene of 10,208,333 shares of our common stock, Aurigene waived $24.5 million in potential milestones and other payments associatedwith the first four programs in the collaboration that may have7Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsbecome due from us under the collaboration agreement. To the extent any of these waived milestones or other payments are not payable by us, e.g. in theevent one or more of the milestone events do not occur, we will have the right to deduct the unused waived amount from any one or more of the milestonepayment obligations tied to achievement of commercial milestone events. The amendment also provides that, in the event supplemental program activitiesare performed by Aurigene, we will provide up to $2.0 million of additional funding for each of the third and fourth licensed program. The shares were issuedpursuant to a stock purchase agreement with Aurigene dated September 7, 2016.As of December 31, 2017, we have exercised our option to license the following three programs under the collaboration:1.IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orallyavailable small molecule inhibitor of IRAK4.2.PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. Thedevelopment candidate is CA-170, an orally available small molecule antagonist of PDL1 and VISTA.3.PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. Thedevelopment candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.In March 2018, we exercised the option to license a fourth program, which is an immuno-oncology program. For each option to license we exercise, weare obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the UnitedStates, specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligationsunder the development plan for such licensed program in an expeditious manner.Subject to specified exceptions, we and Aurigene agreed to collaborate exclusively with each other on the discovery, research, development andcommercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of thecollaboration agreement. At our option, and subject to specified conditions, we may extend such exclusivity for up to three additional one-year periods bypaying to Aurigene additional exclusivity option fees on an annual basis. We exercised the first one-year exclusivity option in 2017. The fee for thisexclusivity option exercise was $7.5 million, which we paid in two equal installments in 2017. We have elected not to further exercise our exclusivity optionand thus will not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of our election to not further exercise ourexclusivity option, we are no longer operating under the broad immuno-oncology exclusivity with Aurigene. We have, however, as provided in theagreement, elected to exercise our option to extend exclusivity on a program-by-program, year-by-year, basis for the IRAK4 Program and the PD1/VISTAProgram, both of the licensed programs currently in clinical trials.Since January 2015, we have paid $14.5 million in research payments, option exercise fees and milestone payments to Aurigene, and have waived$15.5 million in milestones as part of the 2016 amendment. For each of the IRAK4, PD1/VISTA, PD1/TIM3 programs, and the fourth program, we have remaining unpaid or unwaived payment obligations of $42.5million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additionalindications, if any.We have agreed to pay Aurigene tiered royalties on our and our affiliates’ annual net sales of products at percentage rates ranging from the high singledigits up to 10%, subject to specified reductions.We have agreed to make certain payments to Aurigene upon our entry into sublicense agreements on any program(s), including:•with respect to amounts that we and our affiliates receive from sublicensees under a licensed program in the U.S. or the European Union, a decliningpercentage of non-royalty sublicense revenues that is dependent on the stage of the most advanced product for such licensed program at the timethe sublicense is granted, including, for example 25% of such amounts following our initiation of a Phase 2 clinical study and 15% of suchamounts after initiation of the first pivotal study. This sharing will also extend to royalties that we receive from sublicensees, subject to minimumroyalty percentage rates that we are obligated to pay to Aurigene, which generally range from mid-to-high single-digit royalty percentage rates upto 10%;•with respect to sublicensing revenues we and our affiliates receive from sublicensees under a licensed program in Asia, 50% of such sublicensingrevenues, including both non-royalty sublicensee revenues and royalties that we receive from sublicensees; and8Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•with respect to non-royalty sublicensing revenues we and our affiliates receive from sublicensees under a licensed program outside of the U.S., theEuropean Union and Asia, a percentage of such non-royalty sublicense revenues ranging from 30% to 50%. We are also obligated to share 50% ofroyalties that we receive from sublicensees that we receive in these territories.Our royalty payment obligations (including those on sales by sublicensees) under the collaboration agreement with respect to a product in a countrywill expire on a product-by-product and country-by-country basis on the later of: (i) expiration of the last-to-expire valid claim of the Aurigene patentscovering the manufacture, use or sale of such product in such country; and (ii) 10 years from the first commercial sale of such product in such country.The term of the collaboration agreement begins upon signing and, unless earlier terminated, will expire upon either: (i) 90 days after the completion byAurigene of its obligations under all research plans if we have not exercised the option with respect to at least one program by such time; or (ii) expiration ofthe last-to-expire royalty term for any and all products. Upon expiration (but not on earlier termination) of the collaboration agreement, all licenses grantedby Aurigene to us that were in effect immediately prior to such expiration shall survive on a non-exclusive, royalty-free, fully paid, irrevocable, perpetualbasis.The collaboration agreement may be terminated, either in its entirety or with respect to a particular program, by either Aurigene or us for uncuredmaterial breach by the other party, other than an uncured material breach by the other party of its diligence obligations with respect to a program or licensedprogram. If an uncured material breach other than a diligence breach relates to a particular program or licensed program, the non-breaching party mayterminate the collaboration agreement only with respect to that program or licensed program. However, after initiation of the first pivotal clinical trial of aproduct for a licensed program, Aurigene may not terminate the collaboration agreement with respect to such licensed program for an uncured non-diligencebreach by us, except in the case of our uncured material breach of our payment obligations with respect to such licensed program, but Aurigene may pursueany and all remedies that may be available to it at law or in equity as a result of such breach. Similarly, after initiation of the first pivotal clinical trial of aproduct for a licensed program, we may not terminate the collaboration agreement with respect to the license we have granted Aurigene for its territory ofIndia and Russia for such licensed program for an uncured non-diligence breach by Aurigene, but we may pursue any and all remedies that may be availableto us at law or in equity as a result of such breach.On a program-by-program basis, we may terminate the collaboration agreement as it relates to a program or licensed program for an uncured breach byAurigene with respect to such program or licensed program, and Aurigene may terminate the collaboration agreement as it relates to a licensed program for anuncured breach by us with respect to such licensed program.In addition, we may terminate the collaboration agreement in its entirety or as it relates to a particular program or licensed program or on a country-by-country basis, for any reason or for no reason at any time upon 60 days’ prior written notice to Aurigene.In the event of termination of the collaboration agreement in its entirety before we have exercised the option for any program, or termination of thecollaboration agreement as it relates to any program prior to exercise of the option for such program, all rights and licenses granted by either Aurigene or usto the other party with respect to such program under the collaboration agreement (including the option for such program) will automatically terminate.If the royalty term with respect to a product for any licensed program in any country has expired on or before any termination of the collaborationagreement in its entirety or as to such licensed program, the license granted by Aurigene to us with respect to such product in such country, as well as thecorresponding license granted to Aurigene in its territory, shall survive such termination of the collaboration agreement.Solely in the event of termination of the collaboration agreement by Aurigene for our uncured breach, or our termination of the collaboration agreementfor convenience, the following will apply to any program that was a licensed program immediately prior to such termination:•our license with respect to any licensed program that is not a terminated program (defined below), either in our entire territory or in countries withinour territory outside of the terminated region (defined below), as applicable, shall continue in full force and effect, subject to all terms andconditions of the collaboration agreement, including our payment obligations;•our license with respect to any terminated program, either in our entire territory or in the terminated region, as applicable, shall terminate and revertto Aurigene;•we will grant Aurigene a perpetual, royalty-free (except for pass-through royalties and milestone payments payable by us under licenses to thirdparty patent rights with respect to products developed or commercialized by or on behalf9Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsof Aurigene) license, with the right to sublicense, under our relevant patent rights and other technology solely to develop, manufacture andcommercialize compounds and products for any terminated program, either in our entire territory or in the terminated region, as applicable. Theforegoing license will be non-exclusive with respect to our patent rights and exclusive with respect to our other technology;•we will grant to Aurigene a right of first negotiation, exercisable within 90 days after termination, to obtain an exclusive, royalty-bearing license,with the right to sublicense, under our relevant patent rights solely to develop, manufacture and commercialize compounds and products for anyterminated program, either in our entire territory or in the terminated region, as applicable, upon commercially reasonable terms and conditions tobe negotiated in good faith by the parties;•we will perform other specified activities and actions reasonably necessary for Aurigene to develop, manufacture and commercialize compoundsand products for any terminated program, either in our entire territory or in the terminated region, as applicable; and•the applicable license to Aurigene will survive termination.For purposes of the foregoing, “terminated program” means: (i) in the case of termination of the collaboration agreement in its entirety by Aurigene forour uncured non diligence breach, any program that was a licensed program immediately prior to such termination, but excluding, except in the case of ouruncured material breach of our payment obligations with respect to such licensed program, any such licensed program for which initiation of the first pivotalclinical trial of a product has occurred prior to such termination; (ii) in the case of any termination of the collaboration agreement as to a particular licensedprogram by Aurigene either for our uncured non diligence breach (to the extent termination as to such licensed program is permitted) or our uncureddiligence breach, such licensed program; (iii) in the case of our termination of the collaboration agreement in its entirety for convenience, any program thatwas a licensed program immediately prior to such termination; or (iv) in the case of our termination of the collaboration agreement as to a particular licensedprogram for convenience, such licensed program; provided, however, that, in the case of the preceding clauses (iii) and (iv), if our termination of thecollaboration agreement in its entirety or as to a particular licensed program for convenience was with respect only to a particular country or subset ofcountries within the entire territory (as applicable, a “terminated region”), the applicable licensed program(s) shall be considered “terminated program(s)”only in the terminated region but shall remain licensed program(s) in the rest of our territory.GenentechIn 2003, we entered into a collaborative research, development and license agreement with Genentech, which we refer to as the collaboration agreement.Under the terms of our collaboration agreement with Genentech, we granted Genentech an exclusive, global, royalty-bearing license, with the right tosublicense, to make, use, sell and import molecules capable of inhibiting the Hedgehog signaling pathway (including small molecules, proteins andantibodies) for human therapeutic applications, including cancer therapy. Genentech subsequently granted a sublicense to Roche for non-U.S. rights toErivedge other than in Japan where such rights are held by Chugai. Genentech and Roche are responsible for worldwide clinical development, regulatoryaffairs, manufacturing and supply, formulation, and sales and marketing.We are eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connectionwith the development of Erivedge or another small molecule hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche ofspecified clinical development and regulatory objectives. Of this amount, we have received $59.0 million to date.In addition to the contingent cash milestone payments, our wholly-owned subsidiary, Curis Royalty, is entitled to a royalty on net sales of Erivedgethat ranges from 5% to 7.5% based upon global Erivedge sales by Roche and Genentech. The royalty rate applicable to Erivedge may be decreased by 2% ona country-by-country basis in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge isapproved by the applicable country's regulatory authority in another country and is being sold in such country by a third party for use in the same indicationas Erivedge, or, when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded. During the third quarter of 2015, theFDA and the European Medicine Agency’s Committee for Medicinal Products for Human Use, or CHMP, approved another Hedgehog signaling pathwayinhibitor, Odomzo® (sonidegib), which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advanced BCC. Accordingly, Genentechreduced royalties to Curis Royalty on its net sales in the United States of Erivedge by 2% since the fourth quarter of 2015.In November 2012, we formed a wholly owned subsidiary, Curis Royalty, which received a $30.0 million loan at an annual interest rate of 12.25%pursuant to a credit agreement between Curis Royalty and BioPharma-II, a Luxembourg limited10Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsliability company managed by Pharmakon Advisors. In connection with the loan, we transferred to Curis Royalty our rights to receive royalty and royaltyrelated payments on the commercial sales of Erivedge that we receive from Genentech, and any payment made by Genentech to us pursuant to Genentech’sindemnification obligations under the collaboration agreement. The loan and accrued interest was being repaid by Curis Royalty using such royalty androyalty related payments. The loan constituted an obligation of Curis Royalty and was non-recourse to Curis.Quarterly royalty and royalty-related payments from Genentech were first applied to pay (i) escrow fees payable by Curis pursuant to an escrowagreement between Curis, Curis Royalty, BioPharma-II and Boston Private Bank and Trust Company, (ii) Curis’ royalty obligations to university licensors, asdescribed below, (iii) certain expenses incurred by BioPharma-II in connection with the credit agreement and related transaction documents, includingenforcement of its rights in the case of an event of default under the credit agreement and (iv) expenses incurred by Curis enforcing its right toindemnification under the collaboration agreement with Genentech. Remaining amounts were applied first, to pay interest and second, principal on the loan.In addition, if Erivedge royalties were insufficient to pay the accrued interest on the outstanding loan, the unpaid interest outstanding would have beenadded to the principal on a quarterly basis. As a result of the loan received from BioPharma-II, we continued to record royalty revenue from Genentech butexpect such revenues would have been used to pay down such loan until it is repaid in full.In March 2017, we and Curis Royalty entered into a new credit agreement with HealthCare Royalty Partners III, L.P., or HealthCare Royalty, for thepurpose of refinancing the loan from BioPharma-II. HealthCare Royalty made a $45.0 million loan at an interest rate of 9.95% to Curis Royalty, which wasused, in part, to pay off $18.4 million in remaining loan obligations to Biopharma-II under the prior loan, with the residual proceeds of $26.6 milliondistributed to us as sole equity member of Curis Royalty. As of December 31, 2017, Curis Royalty owed HealthCare Royalty a total of $41.9 million, whichwas comprised of principal and accrued interest. Curis Royalty has granted a first priority lien and security interest (excluding certain payments allocable toacademic institutions) in all of its assets and all real, intangible, and personal property, including all of its right, title, and interest in and to the Erivedgeroyalty payments, which are servicing the outstanding debt and accrued interest to HealthCare Royalty, and will continue to do so until the debt is fullyrepaid. The loan constitutes an obligation of Curis Royalty, and is intended to be non-recourse to Curis, except that under certain circumstances arising fromthe breach of certain covenants and representations, HealthCare Royalty may proceed directly against Curis. Because the repayment of the term loan iscontingent upon the level of Erivedge royalties received, the short- and long-term classification of the debt is based on our estimate of the timing of amountsto be repaid. Accordingly, our estimate may not be indicative of when this loan will actually be repaid. The repayment term may be shortened or extendeddepending on the actual level of Erivedge royalties received. In addition, if Erivedge royalties are insufficient to pay the accrued interest on the outstandingloan, any unpaid interest will be added to the principal on a quarterly basis. The length of the actual repayment period could vary materially to the extentthat royalty payments Curis Royalty receives are lower than our current estimates, which reduction could arise due to factors beyond our control, such as: thesale of competing products that result in a lowering of the royalty rates that Curis Royalty is entitled to receive, decreased market acceptance, or failure byGenentech and/or Roche to successfully commercialize Erivedge in territories where it has received regulatory approval.As a result of our licensing agreements with various universities, we are also obligated to make payments to university licensors on royalties that CurisRoyalty earns in all territories (other than Australia) in an amount that is equal to 5% of the royalty payments received from Genentech. This obligationendures for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012. For royalties that we earn from Roche’s sales ofErivedge in Australia, we will be obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia until the expiration of theAustralian patent in April 2019, after which the amount will decrease to 5% of the royalty payments that we receive from Genentech for the remainder of theperiod ending 10 years from the first commercial sale of Erivedge, or February 2022.Unless terminated earlier, the collaboration agreement will expire six months after the later of the expiration of Genentech’s obligation to pay royaltiesto us under the agreement or such time as no activities have occurred under the agreement for a period of twelve months. The collaboration agreement may beterminated earlier by either party for cause upon sixty days prior written notice. In addition, Genentech may terminate the agreement, either in whole or inpart, without cause, upon six months prior written notice. In the event of any termination where specific license grants survive, we will continue to have theright to receive clinical development and regulatory approval milestones and royalties on product sales for such licensed compound, if any. If we terminatethe agreement for cause or Genentech terminates the agreement without cause, all licenses granted to Genentech automatically terminate and revert to us. Inaddition, Genentech has agreed that it will no longer conduct any development or commercialization activities on any compounds identified in the course ofconducting activities under the research plan for the agreement for so long as such compounds continue to be covered by valid patent claims.11Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCorporate InformationWe were organized as a Delaware corporation in February 2000. We began our operations in July 2000 upon the completion of the merger of CreativeBioMolecules, Inc., Ontogeny, Inc. and Reprogenesis, Inc. Our principal executive office is located at 4 Maguire Road, Lexington, MA 02421 and ourtelephone number is (617) 503-6500.CurisTM and the Curis logo are trademarks or registered trademarks of Curis, and Erivedge® is a trademark of Genentech. This annual report on Form 10-K may also contain trademarks and trade names of others.Website Access to ReportsWe maintain a website with the address www.curis.com. We are not including the information contained in our website as part of, or incorporating it byreference into, this annual report on Form 10-K. Our website address is included in this annual report on Form 10-K as an inactive textual reference only. Wemake available free of charge through our website our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K andany such amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish such material to, theSecurities and Exchange Commission, or the SEC. The SEC maintains a website, www.sec.gov, that contains reports, proxy and information statements andother information regarding issuers that file electronically with the SEC. The public may read and copy any materials we file with the Securities andExchange Commission at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on theoperation of the public reference room by calling 1-800-SEC-0330. In addition, we provide paper copies of our filings free of charge upon request. We alsomake available on our website our corporate governance guidelines, the charters for our audit committee, compensation committee and nominating andcorporate governance committee, and our code of business conduct and ethics, and such information is available in print to any stockholder of Curis whorequests it.Intellectual PropertyOur policy is to obtain and enforce the patents and proprietary technology rights that are key to our business. We intend to continue to file U.S. andforeign patent applications to protect technology, inventions and improvements that are considered important to the development of our business. We will beable to protect our proprietary technologies from unauthorized use by third parties only to the extent that our proprietary rights are covered by valid andenforceable patents or are effectively maintained as trade secrets.In the U.S., as of December 31, 2017, we have 87 issued or allowed patents expiring on various dates between 2018 and 2035 as well as numerouspending patent applications. We have foreign counterpart patent filings for most of our U.S. issued patents and patent applications. These patents and patentapplications are directed to various inventions including compositions of matter, methods of making and using these compositions for multiple applications,methods for drug screening and discovery, developmental biological processes, and patents which relate to our proprietary technologies.CUDC-907 and other Targeted Drug Candidates. As of December 31, 2017, we have 26 issued or allowed U.S. patents that expire on various datesbetween 2027 and 2032, including patents covering the composition of matter for CUDC-907, which expires in 2032. We also have several U.S. and foreignutility patent applications directed to our novel small molecules. Our patents and patent applications cover compositions of matter, methods ofmanufacturing these molecules, formulations, and methods of using these molecules to treat a variety of therapeutic indications. We intend to continue to fileadditional U.S. and foreign applications as the programs progress.CA-170, CA-4948, CA-327 and Aurigene Collaboration Programs. In conjunction with the October 2015 exercise of options to license thePDL1/VISTA and IRAK-4 programs and the October 2016 exercise of our option to license the PDL1/TIM3 program under this collaboration, we obtainedworld-wide (except for India and Russia) exclusive licenses to the Aurigene intellectual property relevant to the program. The portfolio consists of filingswhich cover various genera of compounds from each program and methods of use thereof. As of December 31, 2017, there are five issued U.S. patentsincluded in such filings.Erivedge and the Hedgehog Signaling Pathway. As of December 31, 2017, we have 50 issued or allowed U.S. patents expiring on various datesbetween 2018 and 2033, which relate to the Hedgehog signaling pathway, including patents covering Erivedge’s composition of matter, which expires in2028. Our patents and patent applications cover proteins, nucleic acids, antibodies, and certain small molecule agonists and inhibitors of the Hedgehogsignaling pathway, drug screening and discovery methods, methods of protein manufacturing, as well as methods of using the aforementioned proteins,nucleic acids, antibodies or small molecules to activate or inhibit the Hedgehog signaling pathway for a variety of therapeutic indications or diagnostic uses.In addition, we have filed foreign patent applications corresponding to many of the aforementioned U.S. filings that could provide additional patentprotection for products that activate or inhibit the Hedgehog signaling pathway.12Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur academic and research institution collaborators have certain rights to publish data and information regarding their discoveries to which we haverights. While we believe that the prepublication access to the data developed by our collaborators pursuant to our collaboration agreements will be sufficientto permit us to apply for patent protection in the areas in which we are interested in pursuing further research, there is considerable pressure on suchinstitutions to rapidly publish discoveries arising from their efforts. This may affect our ability to obtain patent protection in the areas in which we may havean interest. In addition, these collaboration agreements typically contain provisions that provide us with, at a minimum, an option to license the institution’srights to intellectual property arising from the collaboration.We are party to various license agreements that give us rights to commercialize various technologies, particularly our Hedgehog signaling pathwaytechnologies, and to use technologies in our research and development processes. The consideration payable in exchange for these licenses includes up-frontfees, issuances of shares of common stock, annual royalties, milestone payments and royalties on net sales by our sub-licensees and us. The licensors mayterminate these agreements if we fail to meet certain diligence requirements, fail to make payments or otherwise commit a material breach that is not curedafter notice.In addition, we depend upon trade secrets, know-how and continuing technological advances to develop and maintain our competitive position. Tomaintain the confidentiality of trade secrets and proprietary information, we require our employees, scientific advisors, consultants and collaborators, uponcommencement of a relationship with us, to execute confidentiality agreements and, in the case of parties other than our research and developmentcollaborators, to agree to assign their inventions to us. These agreements are designed to protect our proprietary information and to grant us ownership oftechnologies that are developed in connection with their relationship to us.Research and Development ProgramAs of December 31, 2017, our research and development group consisted of 41 employees, including medical doctors, molecular biologists, cellbiologists, pharmacologists and other clinical or scientific disciplines who seek to identify and develop new applications for our existing proprietaryportfolio.For the years ended December 31, 2017, 2016 and 2015, we incurred expenses of $45.1 million, $31.6 million and $26.7 million, respectively oncompany-sponsored research and development activities. We also recorded in-process research and development expenses of $18.0 million for the year endedDecember 31, 2016, which represented the consideration we paid as part of our amendment to the collaboration agreement with Aurigene. We recorded in-process research and development expenses of $24.3 million for the year ended December 31, 2015, which represented the partial consideration for the rightsgranted to us under the collaboration agreement with Aurigene in January 2015. We had no collaborator-sponsored research and development expense for theyears ended December 31, 2017, 2016 and 2015.Government Regulation and Product ApprovalsGovernment authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union,extensively regulate, among other things, the research, development, testing, manufacture, quality control, approval, packaging, storage, recordkeeping,labeling, advertising, promotion, distribution, marketing, post-approval monitoring and reporting, and import and export of pharmaceutical products. Theprocesses for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance withapplicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.Review and Approval of Drugs in the United StatesIn the United States, the FDA approves and regulates drug products under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementingregulations. The failure to comply with applicable requirements under the FDCA and other applicable laws at any time during the product developmentprocess, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal bythe FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters,product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution,disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities.An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:•completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP,regulations;13Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•submission to the FDA of an IND, which must take effect before human clinical trials may begin;•approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;•performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety andefficacy of the proposed drug product for each indication;•preparation and submission to the FDA of a new drug application, or NDA, requesting marketing for one or more proposed indications;•review of the candidate product by an FDA advisory committee, where appropriate or if applicable;•satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, areproduced to assess compliance with current good manufacturing practices, or cGMP, requirements and to assure that the facilities, methods andcontrols are adequate to preserve the product’s identity, strength, quality and purity;•satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;•payment of user fees and securing FDA approval of the NDA; and•compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, orREMS, and the potential requirement to conduct post-approval studies required by FDA.Preclinical StudiesBefore an applicant begins testing a compound with potential therapeutic value in humans, the drug candidate enters the preclinical testing stage.Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, and the purity and stability of the drug substance, as well asin vitro and animal studies to assess the potential safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use.The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, togetherwith manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to theFDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after theIND is submitted.Applicants usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and mustalso develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug incommercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of thedrug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drugproduct. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidatedoes not undergo unacceptable deterioration over its shelf life.The IND and IRB ProcessesClinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators inaccordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their voluntary informed consent inwriting before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusionand exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol foreach clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trialand a request for FDA authorization to administer an investigational drug to humans. Such authorization must be secured prior to interstate shipment andadministration of any new drug that is not the subject of an approved NDA. In support of a request for an IND, applicants must submit a protocol for eachclinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests,together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, aresubmitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waitingperiod is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At anytime during this 30-day period, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold. Inthis case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trials can begin.14Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFollowing commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold isan order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delayor suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not allowed to proceed, whileother protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a writtenexplanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA hasnotified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting thedeficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND,all FDA IND requirements must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the studycomplies with FDA certain regulatory requirements in order to use the study as support for an IND or application for marketing approval. Specifically, onApril 28, 2008, the FDA amended its regulations governing the acceptance of foreign clinical studies not conducted under an investigational new drugapplication as support for an IND or a new drug application. The final rule provides that such studies must be conducted in accordance with good clinicalpractice, or GCP, including review and approval by an independent ethics committee, or IEC, and informed consent from subjects. The GCP requirements inthe final rule encompass both ethical and data integrity standards for clinical studies. The FDA’s regulations are intended to help ensure the protection ofhuman subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-INDforeign studies are conducted in a manner comparable to that required for IND studies.In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the planfor any clinical trial before it commences at that institution, and the IRB must conduct a continuing review and reapprove the study at least annually. TheIRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB mustoperate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if theclinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harmto patients.Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoringboard or committee or DSMB. This group provides authorization for whether or not a trial may move forward at designated check points based on access thatonly the group maintains to available data from the study. Suspension or termination of development during any phase of clinical trials can occur if it isdetermined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by usbased on evolving business objectives and/or competitive climate.Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for publicdissemination on its ClinicalTrials.gov website.Human Clinical Trials in Support of an NDAClinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators inaccordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their voluntary informed consent inwriting before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusionand exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol foreach clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.Human clinical trials are typically conducted in four sequential phases, which may overlap or be combined:•Phase 1. The drug is initially introduced into a small number of healthy human subjects or, in certain indications such as cancer, patients with thetarget disease or condition (e.g., cancer) and tested for safety, dosage tolerance, absorption, distribution, metabolism, excretion and, if possible, togain an early indication of its effectiveness and to determine optimal dosage.•Phase 2. The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage, and regimen.15Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•Phase 3. These clinical trials are commonly referred to as “pivotal” studies, which denotes a study which presents the data that the FDA or otherrelevant regulatory agency will use to determine whether or not to approve a drug. The drug is administered to an expanded patient population,generally at geographically dispersed clinical trial sites, in well-controlled clinical trials to generate enough data to statistically evaluate theefficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information forthe labeling of the product.•Phase 4. Post-approval studies may be conducted after initial marketing approval. These studies are used to gain additional experience from thetreatment of patients in the intended therapeutic indication.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse eventsoccur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findingsfrom other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the caseof a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA or the sponsor or the data monitoring committeemay suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptablehealth risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is notbeing conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA willtypically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.Concurrent with clinical trials, companies often complete additional animal studies and must also develop additional information about the chemistryand physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, mustdevelop methods for testing the identity, strength, quality, purity, and potency of the final drug. Additionally, appropriate packaging must be selected andtested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.Submission of an NDA to the FDAAssuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, togetherwith detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA aspart of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is subject to anapplication user fee, which for federal fiscal year 2018 is $2.4 million for an application requiring clinical data. The sponsor of an approved NDA is alsosubject to a program fee for fiscal year 2018 of $0.3 million. Certain exceptions and waivers are available for some of these fees, such as an exception fromthe application fee for drugs with orphan designation and a waiver for certain small businesses.The FDA conducts a preliminary review of an NDA within 60 days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receiptof the submission to determine whether the application is sufficiently complete to permit substantive review. The FDA may request additional informationrather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is alsosubject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA hasagreed to certain performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date offiling, and most applications for NMEs for “priority review” products are meant to be reviewed within six months of filing. The review process may beextended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiencyidentified by the FDA following the original submission.Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approvalinspections may cover all facilities associated with an NDA submission, including drug component manufacturing, such as active pharmaceuticalingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that themanufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product withinrequired specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. TheFDA must implement a protocol to expedite review of responses to inspection reportspertaining to certain drug applications, including applications for drugs in a shortage or drugs for which approval isdependent on remediation of conditions identified in the inspection report.16Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond theprofessional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will considerthe size of the population likely to use the product, seriousness of the disease, expected benefit of the product, expected duration of treatment, seriousness ofknown or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plansfor healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification forprescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMSbefore approval or post-approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect thepotential market and profitability of a product.The FDA may refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisorycommittee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as towhether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but itconsiders such recommendations carefully when making decisions.Fast Track, Breakthrough Therapy, Priority Review and Regenerative Advanced Therapy DesignationsThe FDA is authorized to designate certain products for expedited review if they are intended to address an unmet medical need in the treatment of aserious or life-threatening disease or condition. These programs are referred to as fast track designation, breakthrough therapy designation, priority reviewdesignation and regenerative advanced therapy designation.Specifically, the FDA may designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other products,for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease orcondition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Trackproduct’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinicaldata submitted by the sponsor, that a Fast Track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for thesubmission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a Fast Trackapplication does not begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if theFDA believes that the designation is no longer supported by data emerging in the clinical trial process.Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products, totreat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvementover existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDAmay take certain actions with respect to Breakthrough Therapies, including holding meetings with the sponsor throughout the development process;providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.Third, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significantimprovement in safety or effectiveness. The FDA determines, on a case- by-case basis, whether the proposed product represents a significant improvementwhen compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of acondition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead toimprovement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overallattention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months tosix months.Finally, with passage of the 21st Century Cures Act, or Cures Act, in December 2016, Congress authorized the FDA to accelerate review and approval ofproducts designated as regenerative advanced therapies. A product is eligible for this designation if it is a regenerative medicine therapy (as defined in theCures Act) that is intended to treat, modify, reverse or cure a serious or life-threatening disease or condition and preliminary clinical evidence indicates thatthe drug has the potential to address unmet medical needs for such disease or condition. The benefits of a regenerative advanced therapy designation includeearly interactions with FDA to expedite development and review, benefits available to breakthrough therapies, potential eligibility for priority review andaccelerated approval based on surrogate or intermediate endpoints.17Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAccelerated Approval PathwayThe FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful therapeutic advantage topatients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predictclinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint thatcan be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on irreversiblemorbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack ofalternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditionalapproval.For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or othermeasure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit. Surrogate endpoints can often be measured more easily ormore rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely topredict the clinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinicalendpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is notitself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict theultimate clinical benefit of a product.The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required tomeasure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, acceleratedapproval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy isgenerally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstratea clinical or survival benefit.The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post-approvalconfirmatory studies to verify and describe the product’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effect on the clinical endpoint.Failure to conduct required post-approval studies, or confirm a clinical benefit during post-marketing studies, would allow the FDA to withdraw the productfrom the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review bythe FDA.The FDA’s Decision on an NDAOn the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities,the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specificprescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantialadditional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’ssatisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or sixmonths depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that theapplication does not satisfy the regulatory criteria for approval.If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions beincluded in the product labeling, require that post-approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety afterapproval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distributionrestrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. TheFDA may prevent or limit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, many types ofchanges to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testingrequirements and FDA review and approval.Post-Approval RequirementsDrugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among otherthings, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverseexperiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject toprior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which suchproducts are manufactured, as well as new application fees for supplemental applications with clinical data.18Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register theirestablishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliancewith cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDAregulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsorand any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in thearea of production and quality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or ifproblems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to theapproved labeling to add new safety information; imposition of post-market studies or clinical trials to assess new safety risks; or imposition of distributionor other restrictions under a REMS program. Other potential consequences include, among other things:•restrictions on the marketing or manufacturing of the product, suspension of the approval, or complete withdrawal of the product from the market orproduct recalls;•fines, warning letters or holds on post-approval clinical trials;•refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;•product seizure or detention, or refusal to permit the import or export of products; or•injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. This regulationincludes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry sponsoredscientific and educational activities, and promotional activities involving the Internet and social media. Promotional claims about a drug’s safety oreffectiveness are prohibited before the drug is approved. After approval, a drug product generally may not be promoted for uses that are not approved by theFDA, as reflected in the product’s prescribing information. In the United States, healthcare professionals are generally permitted to prescribe drugs for suchuses not described in the drug’s labeling, known as off-label uses, because the FDA does not regulate the practice of medicine. However, FDA regulationsimpose rigorous restrictions on manufacturers’ communications, prohibiting the promotion of off-label uses. It may be permissible, under very specific,narrow conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off-label information, such as distributingscientific or medical journal information. If a company is found to have promoted off-label uses, it may become subject to adverse public relations andadministrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and HumanServices, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civiland criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. The federal government haslevied large civil and criminal fines against companies for alleged improper promotion, and has also requested that companies enter into consent decrees orpermanent injunctions under which specified promotional conduct is changed or curtailed.In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and itsimplementation regulations, as well as the Drug Supply Chain Security Act, or DSCSA, which regulates the distribution of and tracing of prescription drugsand prescription drug samples at the federal level, and sets minimum standards for the regulation of drug distributors by the states. The PDMA, itsimplementing regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCSA imposes requirements toensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.505(b)(2) NDAsNDAs for most new drug products are based on two full clinical studies which must contain substantial evidence of the safety and efficacy of theproposed new product. These applications are submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized to approve an alternativetype of NDA under Section 505(b)(2) of the FDCA. This type of application allows the applicant to rely, in part, on the FDA’s previous findings of safety andefficacy for a similar product, or published literature. Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to showwhether or not the drug is safe for use and effective in use and relied upon by the applicant for approval of the application “were not conducted by or for theapplicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.”19Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the applicant. NDAsfiled under Section 505(b)(2) may provide an alternate and potentially more expeditious pathway to FDA approval for new or improved formulations or newuses of previously approved products. If the Section 505(b)(2) applicant can establish that reliance on the FDA’s previous approval is scientificallyappropriate, the applicant may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companiesto perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new drug candidate for all orsome of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2)applicant.Abbreviated New Drug Applications for Generic DrugsIn 1984, with passage of the Drug Price Competition, Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments to the FDCA, Congressestablished an abbreviated regulatory scheme authorizing the FDA to approve generic drugs that are shown to contain the same active ingredients as, and tobe bioequivalent to, drugs previously approved by the FDA pursuant to NDAs. To obtain approval of a generic drug, an applicant must submit an abbreviatednew drug application, or ANDA, to the agency. An ANDA is a comprehensive submission that contains, among other things, data and information pertainingto the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analyticalmethods, manufacturing process validation data and quality control procedures. ANDAs are “abbreviated” because they generally do not include preclinicaland clinical data to demonstrate safety and effectiveness. Instead, in support of such applications, a generic manufacturer may rely on the preclinical andclinical testing previously conducted for a drug product previously approved under an NDA, known as the reference-listed drug, or RLD.Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the activeingredients, the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA must alsodetermine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent ofabsorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug...”Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “ApprovedDrug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeuticequivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, theFDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribingphysician or patient.Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD hasexpired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. For the purposes of thisprovision, a new chemical entity, or NCE, is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. Anactive moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivityhas been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IVcertification, in which case the applicant may submit its application four years following the original product approval.The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other thanbioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-yearexclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination orindication. Three-year exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutoryrequirement for a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA fromaccepting ANDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product. The FDA typically makesdecisions about awards of data exclusivity shortly before a product is approved.The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight (8) months for adrug that has three (3) or fewer approved drugs listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on theFDA’s drug shortage list. The new legislation also authorizes FDA to expedite review of ‘‘competitor generic therapies’’ or drugs with inadequate genericcompetition, including holding meetings with or providing advice to the drug sponsor prior to submission of the application.20Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsHatch-Waxman Patent Certification and the 30-Month StayUpon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’sproduct or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDAapplicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in theOrange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the Section 505(b)(2)applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for theapproved product in the Orange Book to the same extent that an ANDA applicant would.Specifically, the applicant must certify with respect to each patent that:•the required patent information has not been filed;•the listed patent has expired;•the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or•the listed patent is invalid, unenforceable or will not be infringed by the new product.A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable iscalled a Paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method ofuse, the application will not be approved until all the listed patents claiming the referenced product have expired (other than method of use patents involvingindications for which the applicant is not seeking approval).If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to theNDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringementlawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a ParagraphIV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice,expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant.To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify tothe FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approvalof a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such asexclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a ParagraphIV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that isfavorable to the Section 505(b)(2) applicant.Pediatric Studies and ExclusivityUnder the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety andeffectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for eachpediatric subpopulation for which the product is safe and effective. With enactment of the Food and Drug Administration Safety and Innovation Act orFDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatricstudy or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required byregulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agreeupon a final plan. The FDA or the applicant may request an amendment to the plan at any time. For drugs intended to treat a serious or life-threateningdisease or condition, the FDA must, upon the request of an applicant, meet to discuss preparation of the initial pediatric study plan or to discuss deferral orwaiver of pediatric assessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with drug sponsors. Thelegislation requires FDA to meet with drug sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by no later thanninety (90) days after FDA’s receipt of the study plan.The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval ofthe product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferralrequests and requests for extension of deferrals are contained in FDASIA. Unless and until FDA promulgates a regulation stating otherwise, the pediatric datarequirements do not apply to products with orphan designation.21Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of anadditional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data donot need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request,the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory time limits,whatever statutory or regulatory periods of exclusivity or patent protection cover the product, are extended by six months. This is not a patent termextension, but it effectively extends the regulatory period during which the FDA cannot approve another application. With regard to patents, the six-monthpediatric exclusivity period will not attach to any patents for which an ANDA or 505(b)(2) applicant submitted a paragraph IV patent certification, unless theNDA sponsor or patent owner first obtains a court determination that the patent is valid and infringed by the proposed product.Orphan Drug Designation and ExclusivityUnder the Orphan Drug Act of 1983, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition(generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that thecost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of theproduct.) A company must request orphan product designation before submitting an NDA. If the request is granted, the FDA will disclose the identity of thetherapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review andapproval process.If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation or for a select indication oruse within the rare disease or condition for which it was designated, the product generally will be receiving orphan product exclusivity. Orphan productexclusivity means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limitedcircumstances. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtainapproval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing approvalfor an indication broader than what was designated in its orphan product application, it may not be entitled to exclusivity.Orphan drug exclusivity will not bar approval of another orphan drug under certain circumstances, including if a subsequent product with the samedrug for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a majorcontribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. The new legislation reverses prior precedentholding that the Orphan Drug Actunambiguously required the FDA to recognize orphan exclusivity regardless of a showing of clinical superiority.Patent Term Restoration and ExtensionA patent claiming a new drug product of use may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patentrestoration of up to five years for patent term lost during product development and the FDA regulatory review. The restoration period granted is typicallyone-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and theultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approvaldate. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior tothe expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of theapprovals. The U.S. Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in consultation with theFDA.The 21st Century Cures ActOn December 13, 2016, President Obama signed the Cures Act into law. The Cures Act is designed to modernize and personalize healthcare, spurinnovation and research, and streamline the discovery and development of new therapies through increased federal funding of particular programs. Itauthorizes increased funding for the FDA to spend on innovation projects. The new law also amends the Public Health Service Act to reauthorize and expandfunding for the NIH. The Act establishes the NIH Innovation Fund to pay for the cost of development and implementation of a strategic plan, early stageinvestigators and research. It also charges NIH with leading and coordinating expanded pediatric research. Further, the Cures Act directs the Centers forDisease Control and Prevention to expand surveillance of neurological diseases.With amendments to the FDCA and the Public Health Service Act, or PHSA, Title III of the Cures Act seeks to accelerate the discovery, development,and delivery of new medicines and medical technologies. To that end, and among other provisions, the Cures Act reauthorizes the existing priority reviewvoucher program for certain drugs intended to treat rare pediatric22Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsdiseases until 2020; creates a new priority review voucher program for drug applications determined to be material national security threat medicalcountermeasure applications; revises the FDCA to streamline review of combination product applications; requires FDA to evaluate the potential use of “realworld evidence” to help support approval of new indications for approved drugs; provides a new “limited population” approval pathway for antibiotic andantifungal drugs intended to treat serious or life-threatening infections; and authorizes FDA to designate a drug as a “regenerative advanced therapy,”thereby making it eligible for certain expedited review and approval designations.Review and Approval of Drugs in Europe and other Foreign JurisdictionsIn addition to regulations in the United States, a manufacturer is subject to a variety of regulations in foreign jurisdictions to the extent themanufacturer chooses to sell any drug products in those foreign countries. Even if a manufacturer obtains FDA approval of a product, it must still obtain therequisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in thosecountries. To obtain regulatory approval of an investigational drug or biological product in the European Union (EU), a manufacturer must submit amarketing authorization application to the European Medicines Agency or EMA. For other countries outside of the European Union, such as countries inEastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary fromcountry to country. In all cases, clinical trials are to be conducted in accordance with GCP and the applicable regulatory requirements and the ethicalprinciples that have their origin in the Declaration of Helsinki. The time required to obtain approval in other countries and jurisdictions might differ from andbe longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but afailure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.Clinical Trial Approval in the EURequirements for the conduct of clinical trials in the European Union including Good Clinical Practice, or GCP, are set forth in the Clinical TrialsDirective 2001/20/EC and the GCP Directive 2005/28/EC. Pursuant to Directive 2001/20/EC and Directive 2005/28/EC, as amended, a system for theapproval of clinical trials in the European Union has been implemented through national legislation of the E.U. member states. Under this system, approvalmust be obtained from the competent national authority of each E.U. member state in which a study is planned to be conducted. To this end, a CTA issubmitted, which must be supported by an investigational medicinal product dossier, or IMPD, and further supporting information prescribed by Directive2001/20/EC and Directive 2005/28/EC and other applicable guidance documents. Furthermore, a clinical trial may only be started after a competent ethicscommittee has issued a favorable opinion on the clinical trial application in that country.In April 2014, the E.U. passed the new Clinical Trials Regulation (EU) No 536/2014, which will replace the current Clinical Trials Directive2001/20/EC. To ensure that the rules for clinical trials are identical throughout the European Union, the new E.U. clinical trials legislation was passed as aregulation that is directly applicable in all E.U. member states. All clinical trials performed in the European Union are required to be conducted in accordancewith the Clinical Trials Directive 2001/20/EC until the new Clinical Trials Regulation (EU) No 536/2014 becomes applicable. According to the current plansof EMA, the new Clinical Trials Regulation will become applicable in 2019.The Clinical Trials Directive 2001/20/EC will, however, still apply three yearsfrom the date of entry into application of the Clinical Trials Regulation to (i) clinical trials applications submitted before the entry into application and (ii)clinical trials applications submitted within one year after the entry into application if the sponsor opts for old system.The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trial in the European Union. The main characteristics of theregulation include: a streamlined application procedure via a single entry point, the E.U. portal; a single set of documents to be prepared and submitted forthe application as well as simplified reporting procedures that will spare sponsors from submitting broadly identical information separately to various bodiesand different member states; a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts (Part I is assessedjointly by all member states concerned, and Part II is assessed separately by each member state concerned); strictly defined deadlines for the assessment ofclinical trial applications; and the involvement of the ethics committees in the assessment procedure in accordance with the national law of the member stateconcerned but within the overall timelines defined by the Clinical Trials Regulation.23Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPRIME Designation in the EUIn March 2016, the European Medicines Agency, or EMA, launched an initiative to facilitate development of product candidates in indications, oftenrare, for which few or no therapies currently exist. The Priority Medicines, or PRIME, scheme is intended to encourage drug development in areas of unmetmedical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure. Products fromsmall- and medium-sized enterprises, or SMEs, may qualify for earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsorsof product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions onclinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has beensubmitted. Importantly, a dedicated Agency contact and rapporteur from the Committee for Human Medicinal Products (CHMP) or Committee for AdvancedTherapies (CAT) are appointed early in PRIME scheme facilitating increased understanding of the product at EMA’s Committee level. A kick-off meetinginitiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatorystrategies.Marketing AuthorizationTo obtain marketing approval of a product under European Union regulatory systems, an applicant must submit a marketing authorization application,or MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by theEuropean Commission that is valid for all European Union member states. The centralized procedure is compulsory for specific products, including formedicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products witha new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of other diseasesand products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.Under the centralized procedure, the Committee for Medicinal Products for Human Use, or the CHMP, established atthe European Medicines Agency, or EMA, is responsible for conducting the initial assessment of a product. The CHMP isalso responsible for several post-authorization and maintenance activities, such as the assessment of modifications orextensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of anMAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response toquestions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from thepoint of view of public health and in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the opinion of theCHMP is given within 150 days.The decentralized procedure is available to applicants who wish to market a product in various European Union memberstates where such product has not received marketing approval in any European Union member states before. The decentralized procedure provides forapproval by one or more other, or concerned member states of an assessment of an application performed by one member state designated by the applicant,known as the reference member state. Under this procedure, an applicant submits an application based on identical dossiers and related materials, including adraft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The referencemember state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application. Within 90 days ofreceiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the assessmentreport and related materials.If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputedpoints are subject to a dispute resolution mechanism and may eventually be referred to the European Commission, whose decision is binding on all memberstates.Within this framework, manufacturers may seek approval of hybrid medicinal products under Article 10(3) of Directive 2001/83/EC. Hybridapplications rely, in part, on information and data from a reference product and new data from appropriate pre-clinical tests and clinical trials. Suchapplications are necessary when the proposed product does not meet the strict definition of a generic medicinal product, or bioavailability studies cannot beused to demonstrate bioequivalence, or there are changes in the active substance(s), therapeutic indications, strength, pharmaceutical form or route ofadministration of the generic product compared to the reference medicinal product. In such cases the results of tests and trials must be consistent with the datacontent standards required in the Annex to the Directive 2001/83/EC, as amended by Directive 2003/63/EC.Hybrid medicinal product applications have automatic access to the centralized procedure when the reference product was authorized for marketing viathat procedure. Where the reference product was authorized via the decentralized procedure, a hybrid application may be accepted for consideration underthe centralized procedure if the applicant shows that the medicinal24Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsproduct constitutes a significant therapeutic, scientific or technical innovation, or the granting of a community authorization for the medicinal product is inthe interest of patients at the community level.A marketing authorization may be granted only to an applicant established in the EU. Regulation No. 1901/2006 provides that prior to obtaining amarketing authorization in the EU, an applicant must demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, approvedby the Pediatric Committee of the EMA, covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, class waiver,or a deferral for one or more of the measures included in the PIP.Regulatory Data Exclusivity in the European UnionIn the European Union, innovative medicinal products authorized in the EU on the basis of a full marketing authorization application (as opposed to anapplication for marketing authorization that relies on data available in the marketing authorization dossier for another, previously approved, medicinalproduct) are entitled to eight years of data exclusivity . During this period, applicants for authorization of generics of these innovative products cannot relyon data contained in the marketing authorization dossier submitted for the innovative medicinal product. Innovative medicinal products are also entitled toten years’ market exclusivity. During this ten-year period no generic of this medicinal product can be placed on the EU market. The overall ten-year periodwill be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorizationfor one or more new therapeutic indications which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit incomparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of dataexclusivity, another company may market another version of the product if such company obtained marketing authorization based on an MAA with acomplete independent data package of pharmaceutical tests, preclinical tests and clinical trials.Periods of Authorization and Renewals in the EUA marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of a reevaluation of the risk-benefitbalance by the EMA or by the competent authority of the relevant EU Member State. To that end, the marketing authorization holder must provide the EMAor the relevant competent authority of the EU Member State with a consolidated version of the file in respect of quality, safety and efficacy, including allvariations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. Once renewed,the marketing authorization is valid for an unlimited period, unless the European Commission or the relevant competent authority of the EU Member Statedecides, on justified grounds relating to pharmacovigilance, to proceed with one additional five-year renewal period. Any marketing authorization that is notfollowed by the marketing of the medicinal product on the EU market (in the case of the centralized procedure) or on the market of the EU Member Statewhich delivered the marketing authorization within three years after authorization ceases to be valid.Regulatory Requirements after Marketing AuthorizationSimilar to the U.S., both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight bythe EMA and the competent authorities of the individual EU Member States both before and after grant of the manufacturing and marketing authorizations.The holder of an EU marketing authorization for a medicinal product must also comply with EU pharmacovigilance legislation and its relatedregulations and guidelines which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of medicinalproducts. These rules can impose on central marketing authorization holders for medicinal products the obligation to conduct a labor-intensive collection ofdata regarding the risks and benefits of marketed products and to engage in ongoing assessments of those risks and benefits, including the possiblerequirement to conduct additional clinical studies.The manufacturing process for medicinal products in the EU is highly regulated and regulators may shut down manufacturing facilities that theybelieve do not comply with regulations. Manufacturing requires a manufacturing authorization, and the manufacturing authorization holder must complywith various requirements set out in the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation(EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with EU cGMPstandards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredientsoutside of the EU with the intention to import the active pharmaceutical ingredients into the EU. Similarly, the distribution of medicinal products into andwithin the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizationsfor distribution granted by the competent authorities of the EU Member States.25Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn the EU, the advertising and promotion of our products are subject to EU Member States’ laws governing promotion of medicinal products,interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other legislation adopted by individualEU Member States may apply to the advertising and promotion of medicinal products. These laws require that promotional materials and advertising inrelation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. Promotionof a medicinal product that does not comply with the SmPC is considered to constitute off-label promotion. The off-label promotion of medicinal products isprohibited in the EU. The applicable laws at EU level and in the individual EU Member States also prohibit the direct-to-consumer advertising ofprescription-only medicinal products. These laws may further limit or restrict the advertising and promotion of our products to the general public and mayalso impose limitations on our promotional activities with health care professionals.Orphan Drug Designation and Exclusivity in the EURegulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated an orphan medicinal product by theEuropean Commission if its sponsor can establish: that the product is intended for the diagnosis, prevention or treatment of (1) a life-threatening orchronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-threatening,seriously debilitating or serious and chronic condition in the EU and that without incentives the medicinal product is unlikely to be developed. For either ofthese conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in questionthat has been authorized in the EU or, if such method exists, the medicinal product will be of significant benefit to those affected by that condition. Onceauthorized, orphan medicinal products are entitled to ten years of market exclusivity in all EU Member States and in addition a range of other benefits duringthe development and regulatory review process including scientific assistance for study protocols, authorization through the centralized marketingauthorization procedure covering all member countries and a reduction or elimination of registration and marketing authorization fees. However, marketingauthorization may be granted to a similar medicinal product with the same orphan indication during the ten-year period with the consent of the marketingauthorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficientquantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if this product is safer, more effectiveor otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it canbe demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of marketexclusivity.Brexit and the Regulatory Framework in the United KingdomOn June 23, 2016, the electorate in the United Kingdom (U.K.) voted in favor of leaving the European Union (commonly referred to as “Brexit”).Thereafter, on March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Thewithdrawal of the U.K. from the European Union will take effect either on the effective date of the withdrawal agreement or, in the absence of agreement, twoyears after the U.K. provides a notice of withdrawal pursuant to the E.U. Treaty. Since the regulatory framework for pharmaceutical products in the U.K.covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceuticalproducts is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime which applies to productsand the approval of product candidates in the U.K. It remains to be seen how, if at all, Brexit will impact regulatory requirements for product candidates andproducts in the U.K.Pharmaceutical Coverage, Pricing and ReimbursementIn the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribedservices generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unlesscoverage is provided and reimbursement is adequate to cover a significant portion of the cost of our products. Significant uncertainty exists as to thecoverage and reimbursement status of products approved by the FDA and other government authorities. Even if our drug candidate is approved, sales of ourproducts will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare andMedicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products.The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement ratethat the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medicalnecessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limitcoverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.26Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensivepharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtainFDA or other comparable marketing approvals. Nonetheless, drug candidates may not be considered medically necessary or cost effective. A decision by athird-party payor not to cover our drug candidate could reduce physician utilization of our products once approved and have a material adverse effect on oursales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequatereimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will alsoprovide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. Third-partyreimbursement and coverage may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment inproduct development.The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus inthis effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursementand requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies injurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products. Coveragepolicies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or moreproducts for which a company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implementedin the future.Outside the United States, ensuring adequate coverage and payment for our drug candidate will face challenges. Pricing of prescription pharmaceuticalsis subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatorymarketing approval for a product and may require us to conduct a clinical trial that compares the cost effectiveness of our drug candidate or products to otheravailable therapies. The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts.In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may bemarketed only after a reimbursement price has been agreed. Some countries may require the completion of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies or so-called health technology assessments, in order to obtain reimbursement orpricing approval. For example, the European Union provides options for its member states to restrict the range of products for which their national healthinsurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve aspecific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on themarket. Other member states allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance tophysicians to limit prescriptions.Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals and these efforts could continueas countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the EuropeanUnion. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers arebeing erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricingnegotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states, and parallel trade, i.e.,arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no assurance that any country that has price controls orreimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved inthose countries.Healthcare Law and RegulationHealthcare providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted regulatoryapproval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse laws and regulationsand other healthcare laws and regulations that may constrain our business and/or financial arrangements. Such restrictions under applicable federal and statehealthcare laws and regulations, include the following:•the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering,paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, orthe purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcareprogram such as Medicare and Medicaid;27Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individualsor entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false,fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal anobligation to pay money to the federal government;•the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit,among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or makingfalse statements relating to healthcare matters;•HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations,including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect tosafeguarding the privacy, security and transmission of individually identifiable health information;•the federal false statements statute prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or making any materiallyfalse statement in connection with the delivery of or payment for healthcare benefits, items or services; and•the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act,as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, which requires certain manufacturers of drugs, devices,biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Departmentof Health and Human Services, information related to payments and other transfers of value made by that entity to physicians and teachinghospitals, as well as ownership and investment interests held by physicians and their immediate family members; and analogous state and foreignlaws and regulations, such as state anti-kickback and false claims laws, which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including private insurers.Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevantcompliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments tophysicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information insome circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.Healthcare ReformA primary trend in the United States healthcare industry and elsewhere is cost containment. There have been a number of federal and state proposalsduring the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and othermedical products, government control and other changes to the healthcare system in the United States.By way of example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. InMarch 2010, the United States Congress enacted the Affordable Care Act, which, among other things, includes changes to the coverage and payment forproducts under government health care programs. Among the provisions of the Affordable Care Act of importance to our potential drug candidates are:•an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportionedamong these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales ofcertain products approved exclusively for orphan indications;•expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individualswith income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;•expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and genericdrugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatientprescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans;•addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that areinhaled, infused, instilled, implanted or injected;•expanded the types of entities eligible for the 340B drug discount program;28Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off thenegotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’outpatient drugs to be covered under Medicare Part D;•a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,along with funding for such research;•the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduceexpenditures by the program that could result in reduced payments for prescription drugs. However, the IPAB implementation has been not beenclearly defined. PPACA provided that under certain circumstances, IPAB recommendations will become law unless Congress enacts legislation thatwill achieve the same or greater Medicare cost savings; and•established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lowerMedicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of theCenter for Medicare and Medicaid Innovation from 2011 to 2019.Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include the Budget Control Act of 2011,which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and will stay ineffect through 2024 unless additional Congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reducedMedicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers fromthree to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we mayobtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribedor used. Further, there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bringmore transparency to drug pricing, review therelationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursementmethodologies for drug products.These healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicareand other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price for any approvedproduct and/or the level of reimbursement physicians receive for administering any approved product. Reductions in reimbursement levels may negativelyimpact the prices or the frequency with which products are prescribed or administered. Any reduction in reimbursement from Medicare or other governmentprograms may result in a similar reduction in payments from private payors. Since enactment of the ACA, there have been numerous legal challenges andCongressional actions to repeal and replace provisions of the law. In May 2017, the U.S. House of Representatives passed legislation known as the AmericanHealth Care Act of 2017. Thereafter, the Senate Republicans introduced and then updated a bill to replace the ACA known as the Better Care ReconciliationAct of 2017. The Senate Republicans also introduced legislation to repeal the ACA without companion legislation to replace it, and a “skinny” version of theBetter Care Reconciliation Act of 2017. In addition, the Senate considered proposed healthcare reform legislation known as the Graham-Cassidy bill. None ofthese measures were passed by the U.S. Senate.The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. In January 2017, President Trumpsigned an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay theimplementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, ormanufacturers of pharmaceuticals or medical devices. In October 2017, the President signed a second Executive Order allowing for the use of associationhealth plans and short-term health insurance, which may provide fewer health benefits than the plans sold through the ACA exchanges. At the same time, theAdministration announced that it will discontinue the payment of cost sharing reduction (CSR) payments to insurance companies until Congress approvesthe appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualifiedhealth plans under the ACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the Senate, but the future of that bill is uncertain.More recently, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the“individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will become effective in2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 andpremiums in insurance markets may rise. Further, each chamber of the Congress has put forth multiple bills designed to repeal or repeal and replace portionsof the ACA. Although none of these measures have been enacted by Congress to date, Congress may consider other legislation to29Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrepeal and replace elements of the ACA. The Congress will likely consider other legislation to replace elements of the ACA, during the next Congressionalsession.CompetitionOur drug candidates, if approved, will compete with existing and new products being developed by others for treatment of the same indications.Competition in the development of human therapeutics and, in particular, human therapeutics that target signaling pathways to treat cancers, is intense andrapidly evolving. Our competitors include large pharmaceutical and biopharmaceutical companies, as well as specialized biotechnology firms, that aredeveloping cancer therapies in the same indications as we are. Many competitors have substantially greater research, development, manufacturing,marketing, and financial capabilities, than we do. Successful development and commercialization of products depends on the ability to differentiate thebenefits of our products (e.g. efficacy, safety, dosing, route of administration, convenience, and cost-effectiveness) over competing drug or biologic therapies.There are several companies developing drug candidates that target the same molecular targets and signaling pathways, and in some cases the samecancer indications, that are being pursued by us and our collaborators. We believe our primary competitors by molecular target are as follows:CUDC-907: We are not aware of other molecules in clinical testing that are designed as one chemical entity to target both HDAC and PI3K. However,there are commercially-available drugs that individually target HDAC. For example, commercially available HDAC inhibitors include Farydak™(panobinostat) which is produced by Novartis International AG, Zolinza™ (vorinostat), which is produced by Merck & Company, Istodax™ (romidepsin),which is produced by Celgene Corporation, Beleodaq™ (belinostat) which is produced by Spectrum Pharmaceuticals and Depakine™ (valproate sodium),which is produced by Sanofi. In addition, there are several companies testing novel HDAC inhibitors in clinical trials, including among others, MiratiTherapeutics (mocetinostat), Syndax Pharmaceuticals, Inc. (entinostat), MEI Pharma, Inc. (pracinostat), Regenacy Pharmaceuticals, LLC (ricolinostat),Italfarmaco S.p.A. (givinostat), and Celleron Therapeutics (CXD101). There are multiple companies testing various PI3K inhibitors, both isoform specific andpan-PI3K inhibitors, which are in various stages of clinical development. There are currently two approved isoform specific PI3K inhibitors on the market,Zydelig™ (idelalisib), which is marketed by Gilead Sciences, Inc. and Aliqopa® (copanlisib), which is marketed by Bayer AG. Some of the other companiesdeveloping PI3K inhibitors include Novartis International AG (BKM120/ buparlisib, BYL719, CDZ173), Genentech / Roche (taselisib), Verastem, Inc.(duvelisib), Takeda Pharmaceutical Company Limited (TAK-117, previously MLN1117), GlaxoSmithKline plc (GSK2636771), Pfizer, Inc. (gedatolisib/PF-05212384), Sanofi (voxtalisib/XL765/SAR245409), TG Therapeutics, Inc. (TGR-1202), Incyte Corporation (INCB050465) and Zenyaku Kogyo Co., Ltd(ZSTK474).Licensed Programs Under Aurigene Collaboration. We are aware of at multiple other companies that are developing IRAK4 inhibitors for oncologyindications, including: Pfizer, Nimbus Discovery, TG Therapeutics, Merck, Bristol Myers Squibb and Amgen. In addition, there are multiple approved drugson the market that target PD1/ PDL1 interactions, including Bristol-Myers Squibb’s Opdivo™, Merck & Co.’s Keytruda™, Roche’s Tecentriq™, Merck andPfizer’s Bavencio™ and AstraZeneca's Imfinzi™.Erivedge. In 2015, Sun Pharmaceuticals’ sonidegib (Odomzo®), a Hedgehog signaling pathway inhibitor indicated for the treatment of adult patientswith locally advanced BCC that has recurred following surgery or radiation, or those who are not candidates for surgery or radiation, received regulatoryapprovals in the United States and European Union. We are aware of several other biotechnology and pharmaceutical companies that have drug developmentprograms relating to compounds that modulate the Hedgehog signaling pathway, including: Pfizer Inc. (glasdegib / PF-04449913), Eli Lilly and Company(taladegib / LY2940680), Exelixis, Inc./Bristol-Myers Squibb Company (BMS-833923 / XL139), Pelle Pharm Inc. (patidegib), Novartis International AG(LEQ-506) and Senhwa Biosciences Inc. (silmitasertib / CX-4945).Many competing companies have financial, marketing and human resource capacities that are substantially greater than our own, which may providethese competitors with significant advantages over us. Others have extensive experience in undertaking clinical trials, in obtaining regulatory approval tomarket products, in manufacturing products on a large scale and in effectively promoting products to healthcare providers, health plans and consumers whichmay enhance their competitive position relative to ours. In addition to competing with pharmaceutical and biotechnology companies, the products that weare developing would also compete with those being developed by academic and research institutions, government agencies and other public organizations.Any of these organizations may discover new therapies, seek patent protection or establish collaborative arrangements for products and technologies thatcompete with our products and technologies.The technologies underlying the development of human therapeutic products are expected to continue to undergo rapid and significant advancementand unpredictable changes. Accordingly, our technological and commercial success will be based,30Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsamong other things, on our ability to develop proprietary positions in key scientific areas and efficiently evaluate potential product opportunities.The timing of a product’s introduction may be a major factor in determining eventual commercial success and profitability. Early entry may haveimportant advantages in gaining product acceptance and market share. Accordingly, we believe the relative speed with which we or any current or futurecollaborator(s) can complete preclinical and clinical testing, obtain regulatory approvals, and supply commercial quantities of a product will have animportant impact on our competitive position, both in the U.S. and abroad. Other companies may succeed in developing similar products that are introducedearlier, are more effective, or are produced and marketed more effectively, or at a minimum obtain a portion of the market share. For example, our competitorsmay discover, characterize and develop important targeted cancer molecules before we do, which could have a material adverse effect on any of our relatedresearch programs. If research and development by others renders any of our products obsolete or noncompetitive, then our potential for success andprofitability may be adversely affected.For some of our programs, we rely on, or intend to rely on, strategic collaborators for support in our research programs and for preclinical evaluation andclinical development of our potential products and manufacturing and marketing of any products. Our strategic collaborators may conduct multiple productdevelopment efforts within each disease area that is the subject of our strategic collaboration with them. Our strategic collaboration agreements may notrestrict the strategic collaborator from pursuing competing internal development efforts. Any of our drug candidates, therefore, may be subject to competitionwith a drug candidate under development by a strategic collaborator.Manufacturing and SupplyWe do not have our own manufacturing capabilities. We currently rely on collaborators or subcontractors, and we have no plans to develop our ownmanufacturing capability. Instead, we plan to continue to rely on corporate collaborators or subcontractors to manufacture products. If any of our current orplanned collaborators or subcontractors encounters regulatory compliance problems or enforcement actions for their own or a collaborative product, it couldhave a material adverse effect on our business prospects.We employ a material sourcing strategy that complies with regulatory requirements for building increasing amounts of quality into the product,beginning with raw materials and following through to packaged drug product for clinical use. Starting materials for the drug substance are typically sourcedfrom qualified suppliers, and their production is conducted under our supervision. Where appropriate, redundant suppliers are added to ensure availability ofkey materialsDrug substance and product production, and subsequent packaging, labeling and distribution for all of our development candidates are conducted inthe various locations under GMP controls.Sales and MarketingWe have no sales, marketing or distribution experience or infrastructure and we have no current plans to develop such capabilities. We currently plan torely on corporate collaborators for product sales, marketing and distribution.EmployeesAs of December 31, 2017, we had 55 full-time employees, of whom 14 hold a Ph.D. or other advanced scientific or medical degree. Of our employees, 41are currently involved in research and development. None of our employees is a party to a collective bargaining agreement, and we consider our relationswith our employees to be good.Segment ReportingWe are engaged solely in the discovery and development of innovative drug candidates for the treatment of human cancers. Accordingly, we havedetermined that we operate in one operating segment.Executive Officers of the RegistrantOur executive officers as of March 8, 2018 are as follows:31Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsName Age PositionAli Fattaey, Ph.D. 52 President and Chief Executive OfficerJames Dentzer 51 Chief Financial Officer and Chief Administrative OfficerDavid Tuck, M.D. 66 Chief Medical OfficerAli Fattaey, Ph.D. Dr. Fattaey has served as our President and Chief Executive Officer and as a director since June 2014. FromFebruary 2013 to June 2014, Dr. Fattaey served as our President and Chief Operating Officer. From 2011 untilFebruary 2013, Dr. Fattaey served as the President and Chief Executive Officer and Director of ACT Biotech,Inc., a biotechnology company. Dr. Fattaey served as ACT Biotech’s Chief Operating and Scientific Officerfrom 2008 until 2010. From June 2006 until January 2008, Dr. Fattaey served the Director of Science andTechnology at the Melanoma Therapeutics Foundation, a non-profit organization. From January 2005 untilJune 2006, Dr. Fattaey was a strategic consultant for pharmaceutical and biotechnology companies.Dr. Fattaey was previously employed at Sagres Discovery, Inc., a biotechnology company, as its ChiefScientific Officer from November 2001 until April 2004 and subsequently as the Senior Vice President ofDiscovery Research at Chiron Corporation, a biopharmaceutical company, following Chiron’s acquisition ofSagres Discovery. Dr. Fattaey was employed by Onyx Pharmaceuticals, a biopharmaceutical company, fromJanuary 1994 until June 2001, most recently as its Vice President of Discovery Research. Dr. Fattaey receivedhis Ph.D. in microbiology from Kansas State University in 1989 and was a Research Fellow in Medicine atHarvard Medical School, Massachusetts General Hospital Cancer Center.James Dentzer Mr. Dentzer has served as our Chief Financial Officer and Administration Officer since March 2016. FromDecember 2013 to December 2015, Mr. Dentzer served as Chief Financial Officer of Dicerna Pharmaceuticals,Inc., an RNA interference-based biopharmaceutical company. From March 2010 to December 2013, Mr.Dentzer was the Chief Financial Officer of Valeritas, Inc., a commercial-stage medical technology company.From October 2006 to October 2009, Mr. Dentzer was the Chief Financial Officer of Amicus Therapeutics,Inc., a biotechnology company. In prior positions, Mr. Dentzer spent six years as corporate controller ofBiogen and six years in various senior financial roles at E.I. du Pont de Nemours and Company in the U.S.and Asia. Mr. Dentzer holds a B.A. in philosophy from Boston College and an M.B.A. from the University ofChicago.David Tuck, M.D. Dr. Tuck has served as our Chief Medical Officer since March 2016. From January 2016 to March 2016, Dr.Tuck served as our Senior Vice President, Clinical and Translational Sciences. Dr. Tuck previously served asour Vice President of Clinical and Translational Sciences from May 2015 through January 2016. He joined usfrom EMD Serono, the biopharmaceutical division of Merck KGaA, where he was Senior Medical Director inthe Oncology Translational Innovation Program from 2013 until May 2015, overseeing activities rangingfrom early clinical development of small molecule and biologic targeted therapeutics, to novel target andbiomarker identification focused on bioinformatics and genomics analysis. Prior to that, Dr. Tuck wasemployed by Bristol-Myers Squibb Oncology Research, a cancer research company, from December 2010until May 2013, where he served in the roles of Translational Physician for ipilimumab, and externaldevelopment leader in solid tumors and hematological malignancies for immune checkpoint inhibitors.Between 2000 and 2010, Dr. Tuck was an Associate Professor at Yale University. While at Yale, he led aresearch lab in genomics and bioinformatics of cancer, stem cells and molecular hematology. He also servedas Associate Director of the Yale Comprehensive Cancer Center from 2000 to 2006. Dr. Tuck earned his B.A.at Harvard University and medical degree at the University of Vermont School of Medicine, and receivedboard certification in internal medicine, medical oncology and hematology.ITEM 1A.RISK FACTORSYou should carefully consider the following risk factors, in addition to other information included in this annual report on Form 10-K The risks anduncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that wepresently deem less significant may also impair our business operations. Please see page 4 of this Annual Report on Form 10-K for a discussion of some of theforward-looking statements that are qualified by these risk factors. If any of the following risks occur, our business, financial condition, and results ofoperations and future growth prospects could be materially and adversely affected.32Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRISKS RELATING TO OUR FINANCIAL RESULTS AND NEED FOR FINANCINGWe have incurred substantial losses, expect to continue to incur substantial losses for the foreseeable future and may never generate significant revenueor achieve profitability.We have incurred significant annual net operating losses in every year since our inception. We expect to continue to incur significant and increasingnet operating losses for at least the next several years. Our net losses were $53.3 million, $60.4 million and $59.0 million for the years ended December 31,2017, 2016, and 2015, respectively. As of December 31, 2017, we had an accumulated deficit of $952.3 million. We have not completed the development ofany drug candidate on our own. Other than Erivedge®, which is being commercialized and further developed by Genentech and Roche under our June 2003collaboration with Genentech, we may never have a drug candidate approved for commercialization. We have financed our operations to date primarilythrough public offerings and private placements of our common stock and amounts received through various licensing and collaboration agreements. Wehave devoted substantially all of our financial resources and efforts to research and development and general and administrative expense to support suchresearch and development. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had,and will continue to have, an adverse effect on our stockholders’ (deficit) equity and working capital.We anticipate that our expenses will increase substantially if and as we:•continue to develop and conduct clinical trials with respect to drug candidates;•seek to identify and develop additional drug candidates;•acquire or in-license other drug candidates or technologies;•seek regulatory and marketing approvals for our drug candidates that successfully complete clinical trials, if any;•establish sales, marketing, distribution and other commercial infrastructure in the future to commercialize various drugs for which we may obtainmarketing approval, if any;•require the manufacture of larger quantities of drug candidates for clinical development and, potentially, commercialization;•maintain, expand, and protect our intellectual property portfolio;•hire and retain additional personnel, such as clinical, quality control and scientific personnel; and•add equipment and physical infrastructure as may be required to support our research and development programs.Our ability to become and remain profitable depends on our ability to generate significant revenue. Our only current source of revenues is comprised oflicensing and royalty revenues that we earn under our collaboration with Genentech related to the development and commercialization of Erivedge. Inaddition, all future royalty payments related to Erivedge will service the outstanding debt and accrued interest owed by Curis Royalty to HealthCare RoyaltyPartners III until the debt is fully repaid. The final maturity date of the loan will be the earlier of such date that the principal is paid in full, or Curis Royalty'sright to receive royalties under the collaboration agreement with Genentech is terminated.We do not expect to generate significant revenues other than those related to Erivedge unless and until we are, or any collaborator is, able to obtainmarketing approval for, and successfully commercialize, one or more of our drug candidates other than Erivedge. Successful commercialization will requireachievement of key milestones, including initiating and successfully completing clinical trials of our drug candidates, obtaining marketing approval forthese drug candidates, manufacturing, marketing and selling those drugs for which we, or any of our collaborators, may obtain marketing approval, satisfyingany post-marketing requirements and obtaining reimbursement for our drugs from private insurance or government payors. Because of the uncertainties andrisks associated with these activities, we are unable to accurately predict the timing and amount of revenues and whether or when we might achieveprofitability. We and any collaborators may never succeed in these activities and, even if we do, or any collaborators do, we may never generate revenues thatare large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability. Our failure tobecome and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain ourresearch and development efforts, diversify our pipeline of drug candidates, or continue our operations and cause a decline in the value of our common stock.We will require substantial additional capital, which may be difficult to obtain, and if we are unable to raise capital when needed, we could be forced todelay, reduce, or eliminate our drug development programs or commercialization efforts.33Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe will require substantial funds to continue our research and development programs and to fulfill our planned operating goals. Our planned operatingand capital requirements currently include the support of our research and development activities for CUDC-907, CA-170, CA-4948 and CA-327 as well asdevelopment candidates we have and may continue to license under our collaboration with Aurigene. We will require substantial additional capital to fundthe further development of these programs, as well as to fund our general and administrative costs and expenses. Moreover, under our collaboration, licenseand option agreement with Aurigene, we are required to make milestone, royalty and option fee payments for discovery, research and preclinicaldevelopment programs that will be performed by Aurigene, which impose significant potential financial obligations on us. The collaboration includesmultiple programs, and we have the option to exclusively license compounds once a development candidate is nominated within each respective program.We anticipate that our existing cash, cash equivalents, and investments at December 31, 2017 should enable us to maintain our planned operations intothe second half of 2019. We expect that we will need to raise additional capital or incur indebtedness to continue to fund our operations in the future. Ourability to raise additional funds will depend on financial, economic and market conditions, many of which are outside of its control, and it may be unable toraise 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 ofour development programs, potentially delaying the time to market for any of our product candidates. Factors that may affect our planned future capitalrequirements and accelerate our need for additional working capital include the followingFurthermore, 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;•the timing and amount of option exercise fees, milestone payments, royalties and other payments due to licensors, including Aurigene, for patentrights 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 ourresponsibility, 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 andtechnology license fees; and•unexpected losses in our cash investments or an inability to otherwise liquidate our cash investments due to unfavorable conditions in the capitalmarkets.We transferred and encumbered certain royalty and royalty-related payments on the commercial sales of Erivedge in connection with our creditagreement with HealthCare Royalty Partners III and, as a result, we could lose all rights to future royalty and royalty-related payments.In December 2012, our wholly-owned subsidiary, Curis Royalty, received a $30.0 million loan pursuant to a credit agreement with BioPharma-II. Inconnection with the loan, we transferred to Curis Royalty our right to receive certain future royalty and royalty-related payments on commercial sales ofErivedge that we receive from Genentech. In March 2017, Curis Royalty received a $45.0 million loan pursuant to a credit agreement with HealthCareRoyalty Partners III, or HealthCare Royalty the proceeds of which were first used to pay off $18.4 million in remaining loan obligations to BioPharma-II andthe remaining proceeds were then distributed to Curis as sole equity holder of Curis Royalty. The loan and accrued interest is being repaid by Curis Royaltyusing such royalty and royalty-related payments. To secure repayment of the loan, Curis Royalty granted a first priority lien and security interest (subjectonly to permitted liens) to HealthCare Royalty in all of its assets and all real, intangible and personal property, including all of its right, title and interest inand to the royalty and royalty-related payments. The loan constitutes an obligation of Curis Royalty, and is non-recourse to Curis, except that (i) Curis hasagreed, as a post-closing matter, to use reasonable best efforts to obtain Genentech’s consent to a pledge of Curis’ equity interest in Curis Royalty and (ii)under certain circumstances arising from the breach of certain covenants and representations, HealthCare Royalty may proceed directly against Curis.Under the terms of the credit agreement, neither Curis nor Curis Royalty guaranteed any level of future royalty or royalty-related payments or the valueof such payments as collateral to the loan. However, in certain circumstances, the obligations of Curis Royalty to repay the loan may be accelerated under thecredit agreement, including:34Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•if any payment of principal is not made within three days of when such payment is due and payable or otherwise made in accordance with the termsof the credit agreement;•if any representations or warranties made in the credit agreement or any other related transaction document prove to be incorrect or misleading inany material respect when made;•if there occurs a default in the performance of affirmative and negative covenants set forth in the credit agreement or under certain ancillarytransaction documents;•the failure by Genentech to pay material amounts owed under the collaboration agreement with Genentech because of an actual breach or defaultby Curis under the collaboration agreement;•a material breach or default by Curis Royalty under certain ancillary transaction documents, in each case, which such breach or default is not curedwithin 30 days after written demand thereof by HealthCare Royalty;•the voluntary or involuntary commencement of bankruptcy proceedings by either Curis or Curis Royalty and other insolvency-related defaults;•any materially adverse effect on the binding nature of any of the transaction documents or the Genentech collaboration agreement;•if any person shall be designated an independent director of Curis Royalty other than in accordance with its limited liability company operatingagreement; or•if Curis shall at any time cease to own, of record and beneficially, 100% of the equity interests in Curis Royalty.If any of the above were to occur, Curis Royalty may not have sufficient funds to pay the accelerated obligation and HealthCare Royalty couldforeclose on the secured royalty and royalty-related payment stream. In such an event, we could lose our right to royalty and royalty-related payments nottransferred to HealthCare Royalty, including those we would otherwise be entitled to receive if, or when, Curis Royalty satisfied its obligations to HealthCareRoyalty under the credit agreement.The amount of royalty revenue we received from sales of Erivedge has been adversely affected by a competing drug, and may further be affected in thefuture.Pursuant to the terms of our collaboration agreement, our subsidiary Curis Royalty is entitled to receive royalties on net sales of Erivedge that rangefrom 5% to 7.5% based upon global Erivedge sales by Roche and Genentech. The royalty rate applicable to Erivedge may be decreased in certain specifiedcircumstances, including when a competing drug product that binds to the same molecular target as Erivedge is approved by the applicable country’sregulatory authority and is being sold in such country by a third party for use in the same indication as Erivedge, or when there is no issued intellectualproperty covering Erivedge in a territory in which sales are recorded. During the third quarter of 2015, the FDA and CHMP approved an additional Hedgehogsignaling pathway inhibitor marketed by Sun Pharmaceuticals, sonidegib (Odomzo®), for the treatment of adults with locally advanced BCC.Sales of sonidegib (Odomzo®) were first recorded in the U.S. during the fourth quarter of 2015 and, accordingly, Genentech has reduced royalties on itsnet sales in the U.S. of Erivedge from 5 - 7.5% to 3 - 5.5%. We also believe that sales of sonidegib have, and are likely to, adversely affect sales of Erivedge,including those in the U.S. and ex-U.S. countries, and the resulting revenue we may receive from Genentech. A decrease in sales of Erivedge, or in the royaltyrate that we receive for sales of Erivedge could adversely affect our operating results and the ability of our wholly-owned subsidiary, Curis Royalty, to satisfyits royalty-secured loan obligation to HealthCare Royalty Partners III.Fluctuations in our quarterly and annual operating results could adversely affect the price of our common stock.Our quarterly and annual operating results may fluctuate significantly. Some of the factors that may cause our operating results to fluctuate on a period-to-period basis include:•payments we may be required to make to collaborators such as Aurigene to exercise license rights and satisfy milestones and royalty obligations;•the status of, and level of expenses incurred in connection with, our programs, including development costs relating to CUDC-907, CA-170 andCA-4948, as well as funding programs that we have licensed or may in the future license and develop under our collaboration with Aurigene;•fluctuations in sales of Erivedge and related royalty payments, including fluctuations resulting from the sales of competing drug products such assonidegib, which is approved in the U.S. and Europe for the treatment of locally advanced BCC and is now being marketed and sold by SunPharmaceuticals Industries Ltd., or Sun Pharmaceuticals;35Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•any intellectual property infringement lawsuit or other litigation in which we may become involved;•the implementation of restructuring and cost-savings strategies;•the occurrence of an event of default under the credit agreement by and among Curis, Curis Royalty and HealthCare Royalty;•the implementation or termination of collaboration, licensing, manufacturing or other material agreements with third parties, and non-recurringrevenue or expenses under any such agreement; and•compliance with regulatory requirements.If the estimates we make and the assumptions on which we rely in preparing our financial statements prove inaccurate, our actual results may varysignificantly.Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates andjudgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges taken by us, and disclosures relatedthereto. Such estimates and judgments include the carrying value of our property, the value of equipment and intangible assets, revenue recognition, and thevalue of certain liabilities, the repayment term of our loan from HealthCare Royalty, and stock-based compensation expense. We base our estimates andjudgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. However, these estimates andjudgments, and their underlying assumptions, may change over time. Accordingly, our actual financial results may vary significantly from the estimatescontained in our financial statements.For a further discussion of the estimates and judgments that we make and the critical accounting policies that affect these estimates and judgments, see“Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” set forth in thisreport.RISKS RELATING TO THE DEVELOPMENT AND COMMERCIALIZATION OF OUR DRUGSThe therapeutic efficacy of our drug candidates is unproven in humans, and we may not be able to successfully develop and commercialize drugcandidates pursuant to these programs.Our drug candidates, including CUDC-907, CA-170 and CA-4948, are novel chemical entities and their potential benefit as therapeutic cancer drugs isunproven. Our ability to generate revenues from these drug candidates, which we do not expect will occur in the short term, if ever, will depend heavily ontheir successful development and commercialization, which is subject to many potential risks. For example, our drug candidates may not prove to beeffective inhibitors of the molecular targets they are being designed to act against, and may not demonstrate in patients any or all of the pharmacologicalbenefits that may have been demonstrated in preclinical studies. These drug candidates may interact with human biological systems in unforeseen,ineffective or harmful ways. If the FDA determines that any of our drug candidates are associated with significant side effects or have characteristics that areunexpected, we may need to delay or abandon their development or limit development to certain uses or subpopulations in which the undesirable side effectsor other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective.Moreover, many drug candidates that initially showed promise in early stage testing for treating cancer have later been found to cause side effects thatprevented further development of the compound or resulted in their removal from the market. As a result of these and other risks described herein that areinherent in the development and commercialization of novel therapeutic agents, we may not successfully maintain third party licensing or collaborationtransactions with respect to, or successfully commercialize, drug candidates, in which case we will not achieve profitability and the value of our stock maydecline.We depend heavily on the success of our most advanced drug candidates. All of our drug candidates are still in early clinical or preclinicaldevelopment. Preclinical studies and clinical trials of our drug candidates may not be successful. If we are unable to commercialize our drug candidatesor experience significant delays in doing so, our business will be materially harmed.Our ability to generate drug candidate(s) and/or drug product revenues, which we do not expect will occur for many years, if ever, will depend heavilyon the successful development and eventual commercialization of our most advanced drug candidates, including CUDC-907, CA-170 and CA-4948. Thesuccess of our drug candidates will depend on many factors, including the following:•successful enrollment in, and completion of, ongoing and future clinical trials of CUDC-907, CA-170, CA-4948 and other compounds that we maydevelop under our collaboration agreement with Aurigene;36Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•Aurigene’s ability to successfully discover and preclinically develop other drug candidates under the collaboration agreement;•a safety, tolerability and efficacy profile that is satisfactory to FDA or any comparable foreign regulatory authority for marketing approval;•receipt of requisite marketing approvals from applicable regulatory authorities;•the extent of any required post marketing approval commitments to applicable regulatory authorities;•establishment of supply arrangements with third party raw materials suppliers and manufacturers;•establishment of arrangements with third party manufacturers to obtain finished drug products that is appropriately packaged for sale;•adequate ongoing availability of raw materials and drug products for clinical development and any commercial sales;•obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the United States and internationally;•protection of the rights in our intellectual property portfolio;•successful launch of commercial sales following any marketing approval;•a continued acceptable safety profile following any marketing approval;•commercial acceptance by patients, the medical community and third-party payors; and•our ability to compete with other therapies.If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfullymarket, commercialize, or distribute our most advanced drug candidate, which would materially harm our business.If clinical trials of any future drug candidates that we, or any collaborators, may develop fail to satisfactorily demonstrate safety and efficacy to theFDA and other regulators, we, or any collaborators, may incur additional costs or experience delays in completing, or ultimately be unable tocomplete, the development and commercialization of these drug candidates.We, and any collaborators, are not permitted to commercialize, market, promote or sell any drug candidate in the United States without obtainingmarketing approval from the FDA. Foreign regulatory authorities, such as the European Medicines Agency, or the EMA, impose similar requirements. We,and any collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our drug candidates inhumans before we will be able to obtain these approvals.Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. Wecannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our drug candidates issusceptible to the risk of failure inherent at any stage of drug development, including failure to demonstrate efficacy in a clinical trial or across a broadpopulation of patients, the occurrence of adverse events or undesirable side effects that are severe or medically or commercially unacceptable, failure tocomply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a drugcandidate may not continue development or is not approvable. It is possible that even if one or more of our drug candidates has a beneficial effect, that effectwill not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct oranalysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a drug candidate that isgreater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity of or intolerability caused by our drug candidates,or we may mistakenly believe that our drug candidates are toxic or not well tolerated when that is not in fact the case.Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any collaborators, and impair ourability to generate revenues from drug sales, regulatory and commercialization milestones and royalties. Moreover, if we, or any collaborators, are required toconduct additional clinical trials or other testing of our drug candidates beyond the trials and testing that we or they contemplate, if we, or they, are unable tosuccessfully complete clinical trials of our drug candidates or other testing, or the results of these trials or tests are unfavorable, uncertain or are onlymodestly favorable, or there are unacceptable safety concerns associated with our drug candidates, we, or any future collaborators, may:37Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•incur additional unplanned costs;•be delayed in obtaining marketing approval for our drug candidates;•not obtain marketing approval at all;•obtain approval for indications or patient populations that are not as broad as intended or desired;•obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;•be subject to additional post-marketing testing or other requirements; or•be required to remove the drug from the market after obtaining marketing approval.Our failure to successfully initiate and complete clinical trials of our drug candidates and to demonstrate the efficacy and safety necessary to obtainregulatory approval to market any of our drug candidates would significantly harm our business.Adverse events or undesirable side effects caused by, or other unexpected properties of, drug candidates that we develop may be identified duringdevelopment and could delay or prevent their marketing approval or limit their use.Adverse events or undesirable side effects caused by, or other unexpected properties of, any drug candidates that we may develop could cause us, anycollaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our drug candidates and couldresult in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. If any of our drugcandidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any collaborators, may need to abandondevelopment or limit development of that drug candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics areless prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stagetesting have later been found to cause undesirable or unexpected side effects that prevented further development of the compound.If we, or any collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our drug candidates, potentialclinical development, marketing approval or commercialization of our drug candidates could be delayed or prevented.We, or any collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinicaldevelopment, marketing approval or commercialization of our current drug candidates or any future drug candidates that we, or any collaborators, maydevelop, including:•regulators or institutional review boards may not authorize us, any collaborators or our or their investigators to commence a clinical trial or conducta clinical trial at a prospective trial site;•we, or any collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols withprospective trial sites;•clinical trials of our drug candidates may produce unfavorable or inconclusive results;•we, or any collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon drug developmentprograms;•the number of patients required for clinical trials of our drug candidates may be larger than we, or any collaborators, anticipate, patient enrollmentin these clinical trials may be slower than we, or any collaborators, anticipate or participants may drop out of these clinical trials at a higher ratethan we, or any collaborators, anticipate;•our estimates of the patient populations available for study may be higher than actual patient numbers and result in our inability to sufficientlyenroll our trials;•the cost of planned clinical trials of our drug candidates may be greater than we anticipate;•our third-party contractors or those of any collaborators, including those manufacturing our drug candidates or components or ingredients thereofor conducting clinical trials on our behalf or on behalf of any collaborators, may fail to comply with regulatory requirements or meet theircontractual obligations to us or any collaborators in a timely manner or at all;•patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol,resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial’sduration;38Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•we, or any collaborators, may have to delay, suspend or terminate clinical trials of our drug candidates for various reasons, including a finding thatthe participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the drug candidate;•regulators or institutional review boards may require that we, or any collaborators, or our or their investigators suspend or terminate clinicalresearch for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants arebeing exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the drug candidate or findings ofundesirable effects caused by a chemically or mechanistically similar drug or drug candidate;•the FDA or comparable foreign regulatory authorities may disagree with our, or any collaborators’, clinical trial designs or our or theirinterpretation of data from preclinical studies and clinical trials;•the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilitiesof third-party manufacturers with which we, or any collaborators, enter into agreements for clinical and commercial supplies;•the supply or quality of raw materials or manufactured drug candidates or other materials necessary to conduct clinical trials of our drug candidatesmay be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and•the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering ourclinical data insufficient to obtain marketing approval.Drug development costs for us, or any collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we,or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of our drug candidates. We do notknow whether any preclinical tests or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significantpreclinical study or clinical trial delays also could shorten any periods during which we, or any collaborators, may have the exclusive right to commercializeour drug candidates or allow our competitors, or the competitors of any collaborators, to bring drugs to market before we, or any collaborators, do and impairour ability, or the ability of any collaborators, to successfully commercialize our drug candidates and may harm our business and results of operations. Inaddition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of any of our drug candidates.If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligiblepatients to participate in these trials. Patient enrollment is a significant factor in the timing of clinical trials, and is affected by many factors, including:•the size and nature of the patient population;•the severity of the disease under investigation;•the availability of approved therapeutics for the relevant disease;•the proximity of patients to clinical sites;•the eligibility criteria and design for the trial;•efforts to facilitate timely enrollment;•competing clinical trials; and•clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies,including any new drugs that may be approved for the indications we are investigating.In addition, many of our competitors have ongoing clinical trials for drug candidates that could be competitive with our drug candidates. Patients whowould otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ drug candidates or rely upon treatment with existingtherapies that may preclude them from eligibility for our clinical trials.Our inability, or the inability of any future collaborators, to enroll a sufficient number of patients for our, or their, clinical trials could result insignificant delays or may require us or them to abandon one or more clinical trials altogether. Enrollment39Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsdelays in our clinical trials, including for clinical trials of CUDC-907, CA-170 and CA-4948, may result in increased development costs for our drugcandidates, which could cause the value of our stock price to decline.Results of preclinical studies and early clinical trials may not be predictive of results of future late stage clinical trials.We cannot assure you that we will be able to replicate in human clinical trials the results we observed in animal models. Moreover, the outcome ofpreclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarilypredict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late stageclinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine whetherits results will support approval of a drug and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We havelimited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinicaland clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their drug candidates performed satisfactorilyin preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the drug candidates. Even if we, or any collaborators,believe that the results of clinical trials for our drug candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities maydisagree and may not grant marketing approval of our drug candidates.In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same drug candidate due tonumerous factors, including changes in trial procedures set forth in protocols, differences in the size and type of the patient populations, changes in andadherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive resultsin clinical trials of our drug candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced drugcandidates, and, correspondingly, our business and financial prospects would be negatively impacted.Interim, “top-line,” initial, and preliminary data from our clinical trials that we announce or publish from time to time may change as more patientdata become available or as additional analyses are conducted, and audit and verification procedures could result in material changes to the final data.From time to time, we publish interim, “top-line,” initial, or preliminary data from our clinical studies. Interim data from clinical trials that we maycomplete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient databecome available. Initial, preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data beingmaterially different from the data we previously published. As a result, interim, "top-line," initial, and preliminary data should be viewed with caution untilthe final data are available. Material adverse changes between such data and final published data could significantly harm our business prospects.We have never obtained marketing approval for a drug candidate and we may be unable to obtain, or may be delayed in obtaining, marketingapproval for any of our current drug candidates or any future drug candidates that we, or any future collaborators, may develop.We have never obtained marketing approval for a drug candidate. It is possible that the FDA may refuse to accept for substantive review any new drugapplications, or NDAs, that we submit for our drug candidates or may conclude after review of our data that our application is insufficient to obtain marketingapproval of our drug candidates. If the FDA does not accept or approve our NDAs for any of our drug candidates, it may require that we conduct additionalclinical trials, preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extentof these or any other FDA-required trials or studies, approval of any NDA or application that we submit may be delayed by several years, or may require us toexpend more resources than we have available. It is also possible that additional trials or studies, if performed and completed, may not be consideredsufficient by the FDA to approve our NDAs. Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializingour drug candidates or any companion diagnostics, generating revenues and achieving and sustaining profitability. If any of these outcomes occurs, we maybe forced to abandon our development efforts for our drug candidates, which could significantly harm our business.Even if any drug candidates that we, or any collaborators, may develop receive marketing approval, we or others may later discover that the drug isless effective than previously believed or causes undesirable side effects that were not previously identified, which could compromise our ability, or thatof any collaborators, to market the drug.Clinical trials of any drug candidates we may develop will be conducted in carefully defined subsets of patients who have agreed to enter into clinicaltrials. Consequently, it is possible that our clinical trials, or those of any collaborator, may indicate an apparent positive effect of a drug candidate that isgreater than the actual positive effect, if any, or alternatively fail to40Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsidentify undesirable side effects. If, following approval of a drug candidate, we, or others, discover that the drug is less effective than previously believed orcauses undesirable side effects that were not previously identified, any of the following adverse events could occur:•regulatory authorities may withdraw their approval of the drug or seize the drug;•we, or any future collaborators, may be required to recall the drug, change the way the drug is administered or conduct additional clinical trials;•additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;•we may be subject to fines, injunctions or the imposition of civil or criminal penalties;•regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;•we, or any future collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects fordistribution to patients;•we, or any future collaborators, could be sued and held liable for harm caused to patients;•the drug may become less competitive; and•our reputation may suffer.Any of these events could harm our business and operations, and could negatively impact our stock price.Even if our drug candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-partypayors and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or becomeprofitable.We have never commercialized a drug, and even if one of our drug candidates is approved by the appropriate regulatory authorities for marketing andsale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. Physiciansare often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market.Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching drugs orthey are required to switch therapies due to lack of reimbursement for existing therapies.Efforts to educate the medical community and third-party payors on the benefits of our drug candidates may require significant resources and may notbe successful. If any of our drug candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significantrevenues and we may not become profitable. The degree of market acceptance of our drug candidates, if approved for commercial sale, will depend on anumber of factors, including:•the efficacy and safety of the drug;•the potential advantages of the drug compared to competitive therapies;•the prevalence and severity of any side effects;•whether the drug is designated under physician treatment guidelines as a first-, second- or third-line therapy;•our ability, or the ability of any future collaborators, to offer the drug for sale at competitive prices;•the drug’s convenience and ease of administration compared to alternative treatments;•the willingness of the target patient population to try, and of physicians to prescribe, the drug;•limitations or warnings, including distribution or use restrictions, contained in the drug’s approved labeling;•the strength of sales, marketing and distribution support;•changes in the standard of care for the targeted indications for the drug; and•availability and amount of coverage and reimbursement from government payors, managed care plans and other third-party payors.We may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications thatmay be more profitable or for which there is a greater likelihood of success.41Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsBecause we have limited financial and managerial resources, we focus on research programs and drug candidates that we believe may have the bestpotential in certain specific indications. As a result, we may delay or forgo pursuit of certain opportunities with our other drug candidates or for otherindications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercialdrugs or profitable market opportunities. Our spending on current and future proprietary research and development programs and drug candidates for specificindications may not yield any commercially viable drug candidates. If we do not accurately evaluate the commercial potential or target market for aparticular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty arrangements in cases inwhich it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate.We have no sales, marketing, or distribution experience and, as such, plan to rely primarily on third parties who may not successfully market or sellany drugs we develop.We have no sales, marketing, or drug distribution experience or capabilities. If we receive required regulatory approvals to commercialize any of ourdrug candidates, we plan to rely primarily on sales, marketing and distribution arrangements with third parties, including our collaborative partners. Forexample, as part of our agreements with Genentech, we have granted Genentech the exclusive rights to distribute drugs resulting from such collaboration, andGenentech is currently commercializing Erivedge. We may have to enter into additional marketing and/or sales arrangements in the future and we may not beable to enter into these additional arrangements on terms that are favorable to us, if at all. In addition, we may have limited or no control over the sales,marketing, and distribution activities of these third parties, and sales through these third parties could be less profitable for us than direct sales. These thirdparties could sell competing drugs and may devote insufficient sales efforts or resources to our drugs. Our future revenues will be materially dependent uponthe successful efforts of these third parties.We may seek to independently market and sell drugs that are not already subject to agreements with other parties. If we undertake to perform sales,marketing and distribution functions ourselves, we could face a number of additional risks, including:•we may not be able to attract and build a significant and skilled marketing staff or sales force;•the cost of establishing a marketing staff or sales force may not be justifiable in light of the revenues generated by any particular drug; and•our direct sales and marketing efforts may not be successful.We face substantial competition, and our competitors may discover, develop or commercialize drugs before or more successfully than we do.Our drug candidates face competition from existing and new technologies and drugs being developed by biotechnology, medical device, andpharmaceutical companies, as well as universities and other research institutions. For example, there are several companies developing drug candidates thattarget the same molecular targets that we are targeting or that are testing drug candidates in the same cancer indications that we are testing. For example,while we are not aware of other molecules in clinical testing that are designed as one chemical entity to target both PI3K and HDAC, there are commercially-available drugs that individually target PI3K or HDAC and there are multiple companies testing PI3K or HDAC inhibitors that are in various stages of clinicaldevelopment.We are aware of multiple other companies that are developing IRAK4 inhibitors for oncology indications, including: Pfizer, Nimbus Discovery, TGTherapeutics, Merck, Bristol Myers Squibb and Bayer Amgen. In addition, there are multiple approved products on the market that inhibit PD1/PDL1,including Bristol-Myers Squibb Company’s Opdivo™, Merck’s Keytruda™, and Roche's Tecentriq™, Merck KGaA / Pfizer’s Bavencio™, and AstraZenecaPLC’s Imfinzi™ and a number of drug candidates in various stages of development (by Regeneron, Novartis AG, Tesaro Inc., and others). We are also aware ofat least three other companies developing drugs to target TIM3, including Novartis, Tesaro and Eli Lilly and Company.We are aware of several companies that have drug development programs relating to compounds that modulate the Hedgehog signaling pathway andmay compete with Erivedge, including : Pfizer (glasdegib / PF-04449913), Eli Lilly and Company (taladegib / LY2940680), Exelixis, Inc./Bristol-MyersSquibb, Company (BMS-833923 / XL139), Pelle Pharm Inc (patidegib), Novartis International AG (LEQ-506) and Senhwa Biosciences Inc. (silmitasertib /CX-4945). Furthermore, sonidegib (Odomzo™) is marketed by Sun Pharmaceuticals, for the treatment of adults with locally advanced BCC. Under the termsof our collaboration agreement with Genentech, our royalty on sales of Erivedge has been reduced as a result of sales of sonidegib.Many of our competitors have substantially greater capital resources, research and development staffs and facilities, and more extensive experiencethan we have. As a result, efforts by other biotechnology, medical device and pharmaceutical42Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscompanies could render our programs or drugs uneconomical or result in therapies superior to those that we develop alone or with a collaborator. For thoseprograms that we have selected for internal development, we face competition from companies that are more experienced in drug development andcommercialization, obtaining regulatory approvals and drug manufacturing. Mergers and acquisitions in the pharmaceutical and biotechnology industriesmay result in even more resources being concentrated among a smaller number of our competitors. Other smaller companies may also prove to be significantcompetitors, particularly through collaborative arrangements with large and established companies. These third parties compete with us in recruiting andretaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiringtechnologies complementary to, or necessary for, our programs. As a result, any of these companies may be more successful in obtaining collaborationagreements or other monetary support, approval and commercialization of their drugs and/or may develop competing drugs more rapidly and/or at a lowercost.If we are not able to compete effectively, then we may not be able, either alone or with others, to advance the development and commercialization ofour drug candidates, which would adversely affect our ability to grow our business and become profitable.Even if we, or any collaborators, are able to commercialize any drug candidate that we, or they, develop, the drug may become subject to unfavorablepricing regulations, third-party payor reimbursement practices or healthcare reform initiatives, any of which could harm our business.The commercial success of our drug candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our drugcandidates will be paid by third-party payors, including government health care programs and private health insurers. If coverage is not available, orreimbursement is limited, we, or any collaborators, may not be able to successfully commercialize our drug candidates. Even if coverage is provided, theapproved reimbursement amount may not be high enough to allow us, or any collaborators, to establish or maintain pricing sufficient to realize a sufficientreturn on our or their investments. In the United States, no uniform policy of coverage and reimbursement for drugs exists among third-party payors andcoverage and reimbursement levels for drugs can differ significantly from payor to payor. As a result, the coverage determination process is often a timeconsuming and costly process that may require us to provide scientific and clinical support for the use of our drugs to each payor separately, with noassurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing andreimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can bemarketed. In many countries, the pricing review period begins after marketing or drug licensing approval is granted. In some foreign markets, prescriptionpharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any future collaborators,might obtain marketing approval for a drug in a particular country, but then be subject to price regulations that delay commercial launch of the drug,possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the drug in that country. Adversepricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or more drug candidates, even ifour drug candidates obtain marketing approval.Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated withtheir treatment. Therefore, our ability, and the ability of any future collaborators, to commercialize successfully any of our drug candidates will depend inpart on the extent to which coverage and adequate reimbursement for these drugs and related treatments will be available from third-party payors. Third-partypayors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both inthe United States and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount ofreimbursement for particular medications, which could affect our ability or that of any future collaborators to sell our drug candidates profitably. Thesepayors may not view our drugs, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any futurecollaborators, or may not be sufficient to allow our drugs, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any futurecollaborators, to decrease the price we, or they, might establish for drugs, which could result in lower than anticipated drug revenues. If the prices for ourdrugs, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue andprofitability will suffer.There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indicationsfor which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that anydrug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement ratesmay vary, by way of example, according to the use of the drug and the clinical setting in which it is used. Reimbursement rates may also be based onreimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.43Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and arechallenging the prices charged. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws thatpresently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. An inability to promptly obtain coverageand adequate payment rates from both government-funded and private payors for any of our drug candidates for which we, or any future collaborator, obtainmarketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize drugs and our overall financialcondition.Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit commercialization of any drugs that wemay develop.Product liability claims are inherent in the process of researching, developing and commercializing human healthcare drugs and could expose us tosignificant liabilities and prevent or interfere with the development or commercialization of our drug candidates. Any such product liability claims mayinclude allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the drug, negligence, strict liability or a breach ofwarranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, wemay incur substantial liabilities or be required to limit commercialization of our drug candidates. Regardless of their merit or eventual outcome, such liabilityclaims would require us to spend significant time, money and other resources to defend such claims, and could result in:•decreased demand for our drug candidates or drugs that we may develop;•injury to our reputation and significant negative media attention;•withdrawal of clinical trial participants;•significant costs to defend resulting litigation;•substantial monetary awards to trial participants or patients;•loss of revenue;•reduced resources of our management to pursue our business strategy; and•the reduced ability or inability to commercialize any drugs that we may develop.Although we currently have product liability insurance for our clinical trials, this insurance is subject to deductibles and coverage limitations and maynot be adequate in scope to protect us in the event of a successful drug liability claim. The cost of any product liability litigation or other proceeding, even ifresolved in our favor, could be substantial. We will need to increase our insurance coverage if and when we commercialize any drug that receives marketingapproval. In addition, insurance coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at anacceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production andsale of our drug candidates, which could harm our business, financial condition, results of operations and prospects.RISKS RELATING TO OUR DEPENDENCE ON THIRD PARTIESWe are reliant on Genentech and Roche for the successful development and commercialization of Erivedge. If Genentech and Roche do not successfullycommercialize Erivedge for advanced BCC or develop Erivedge for other indications, our future prospects may be substantially harmed.Erivedge is FDA-approved for people with advanced BCC in the United States. Erivedge is also approved in over 60 foreign countries. Genentechand/or Roche have filed regulatory submissions in additional territories seeking approval to commercialize Erivedge for this same indication. Our levels ofrevenue in each period and our near-term prospects substantially depend upon Genentech’s ability to successfully develop and commercialize Erivedge inone or more additional indications and to demonstrate its safety and efficacy, as well as its superiority over existing therapies and standards of care. Thedevelopment and commercialization of Erivedge could be unsuccessful if:•Erivedge becomes no longer accepted as safe, efficacious, cost-effective and preferable for the treatment of advanced BCC to current therapies inthe medical community and by third-party payors;•Genentech and/or Roche fail to continue to apply the necessary financial resources and expertise to manufacturing, marketing and selling Erivedgefor advanced BCC, and to regulatory approvals for this indication outside of the U.S.;•Genentech and/or Roche do not continue to develop and implement effective marketing, sales and distribution strategies and operations fordevelopment and commercialization of Erivedge for advanced BCC;44Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•Genentech and/or Roche do not continue to develop, validate and maintain a commercially viable manufacturing process for Erivedge that iscompliant with current good manufacturing practices;•Genentech and/or Roche do not successfully obtain third party reimbursement and generate commercial demand that results in sales of Erivedge foradvanced BCC in any geographic areas where requisite approvals have been, or may be, obtained;•we, Genentech, or Roche encounter third-party patent interference, derivation, inter partes review, post-grant review, reexamination or patentinfringement claims with respect to Erivedge;•Genentech and/or Roche do not comply with regulatory and legal requirements applicable to the sale of Erivedge for advanced BCC;•competing drug products are approved for the same indications as Erivedge, such as is the case with sonidegib, which is being marketed and soldby Sun Pharmaceutical, both in the U.S. and abroad for the treatment of adults with locally advanced BCC;•new safety risks are identified;•Erivedge does not demonstrate acceptable safety and efficacy in current or future clinical trials, or otherwise does not meet applicable regulatorystandards for approval in indications other than advanced BCC;•Genentech and/or Roche determine to re-prioritize Genentech’s commercial or development programs and reduce or terminate Genentech’s effortson the development or commercialization of Erivedge; or•Genentech does not exercise its first right to maintain or defend intellectual property rights associated with Erivedge.In addition, pursuant to the terms of our credit agreement with HealthCare Royalty Partners III, we expect that all royalties that Curis Royalty receivesunder our collaboration agreement with Genentech will, for the foreseeable future, be remitted to HealthCare Royalty Partners III in repayment of our loan.We depend on third parties for the research and, as applicable, development and commercialization of certain programs. If one or more of ourcollaborators fails or delays in developing or, as applicable, commercializing drug candidates based upon our technologies, our business prospects andoperating results would suffer and our stock price would likely decline.Pursuant to our collaboration with Genentech, we have granted to Genentech exclusive rights to develop and commercialize drugs based upon ourHedgehog signaling pathway technologies. In addition, pursuant to our collaboration agreement with Aurigene, Aurigene may develop various immuno-oncology, selected precision oncology and other potential targets which we will have the option to license and advance into clinical trials. Collaborationsinvolving our drug candidates, including our collaborations with Aurigene and Genentech, pose the following risks to us:•Our collaborators each have significant discretion in determining the efforts and resources that they will apply to their respective collaborationwith us. If a collaborator fails to allocate sufficient time, attention and resources to our collaboration, the successful development andcommercialization of drug candidates under such collaboration is likely to be adversely affected. For example, we are dependent on Aurigene tosuccessfully discover and advance preclinical programs from which we may exercise our option to license drug candidates for future development.•Our collaborators may develop and commercialize, either alone or with others, drugs that are similar to or competitive with the drug candidates thatare the subject of our respective collaborations. For example, Genentech and Roche are involved in the commercialization of many cancermedicines and are seeking to develop several other cancer drug therapies, and Aurigene has other active cancer-focused discovery programs andhas also entered into license agreements with other companies that focus on cancer therapies.•Our collaborators may change the focus of their development and commercialization efforts or pursue higher-priority programs.•Our collaborators may enter into one or more transactions with third parties, including a merger, consolidation, reorganization, sale of substantialassets, sale of substantial stock or change of control. Any such transaction could divert the attention of our collaborative partner’s management andadversely affect its ability to retain and motivate key personnel who are important to the continued development of the programs under suchcollaboration. In addition, an acquirer could determine to reprioritize our collaborator’s development programs such that our collaborator ceases todiligently pursue the development of our programs, and/or terminates our collaboration.45Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•Our collaborators may, under specified circumstances, terminate their collaborations with us on short notice and for circumstances outside of ourcontrol, which could make it difficult for us to attract new collaborators or adversely affect how we are perceived in the scientific, biotech, pharmaand financial communities.•Our collaborators may utilize our intellectual property rights in such a way as to invite litigation that could jeopardize or invalidate our intellectualproperty rights, or expose us to potential liability.•Disputes may arise between collaborators and us regarding ownership of or other rights in the intellectual property generated in the course of thecollaborations.•If any of our collaborators were to breach or terminate its arrangement with us, the development and commercialization of the affected drugcandidate or program could be delayed, curtailed or terminated.If Genentech and other third parties are not successful in commercializing products that reach successful development, our revenues and business willsuffer.As development of certain of our drug candidates advance, we must begin to plan for their launch and commercial distribution. Potential competitorsmay have substantially greater financial and other resources and may be able to expend more funds and effort than Genentech or other third parties engagedby us in marketing competing products. There can be no assurance that Genentech or other third parties will succeed in commercializing our products, or thatthe pricing of our products will allow us to generate significant revenues. There can be no assurance that Genentech or other third parties engaged tocommercialize our products will devote sufficient resources to marketing and commercialization of our products. Genentech’s or third party’s failure tosuccessfully commercialize our products will have a material adverse effect on our business and financial condition.We may not be successful in establishing additional strategic collaborations, which could adversely affect our ability to develop and commercializedrug candidates.We intend to seek corporate collaborators or licensees for the further development and commercialization of one or more of our drug candidates in oneor more geographic territories, particularly in territories outside of the United States. We do not currently have the resources or capacity to advance theseprograms into later stage clinical development (i.e., Phase 3) or commercialization on our own, but we are seeking to build such a capacity to enable us toretain development and certain commercial rights to most of our programs in at least the United States, should we elect to do so. Our success will depend, inpart, on either our ability to build such capacity, or our ability to enter into one or more collaborations for our drug candidates. We face significantcompetition in seeking appropriate collaborators and a number of recent business combinations in the biotechnology and pharmaceutical industry may resultin a reduced number of potential future collaborators. In addition, collaborations are complex and time-consuming to negotiate and document. We may notbe able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of theproduct candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delayits potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development orcommercialization activities at our own expense. Moreover, we may not be successful in our efforts to establish a collaboration or other alternativearrangements because our research and development pipeline may be insufficient, our programs may be deemed to be at too early of a stage of developmentfor collaborative effort and/or third parties may not view our drug candidates and programs as having the requisite potential to demonstrate safety andefficacy or as sufficiently differentiated compared to existing or emerging treatments. We are also restricted under the terms of certain of our existingcollaboration agreements from entering into collaborations regarding or otherwise developing drug candidates that are similar to the drug candidates that aresubject to those agreements, such as developing drug candidates that inhibit the same molecular target. In addition, collaboration agreements that we enterinto in the future may contain further restrictions on our ability to enter into potential collaborations or to otherwise develop specified drug candidates. Evenif we are successful in our efforts to establish new collaborations, the terms that we agree upon may not be favorable to us and such collaboration agreementsmay not lead to development or commercialization of drug candidates in the most efficient manner, or at all.Moreover, if we fail to establish and maintain additional collaborations related to our drug candidates:•the development of certain of our current or future drug candidates may be terminated or delayed;•our cash expenditures related to development of certain of our current or future drug candidates would increase significantly and we may need toseek additional financing;•we may be required to hire additional employees or otherwise develop additional expertise, such as clinical, regulatory, sales and marketingexpertise, for which we have not budgeted;•we will have to bear all of the risk related to the development of any such drug candidates; and46Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•our future prospects may be adversely affected and our stock price could decline.We rely in part on third parties to conduct clinical trials of our internally-developed drug candidates, and if such third parties perform inadequately,including failing to meet deadlines for the completion of such trials, research or testing, then we will not be able to successfully develop andcommercialize drug candidates and grow our business.We rely heavily on third parties such as consultants, clinical investigators, contract research organizations and other similar entities to complete certainaspects of our preclinical testing and clinical trials and provide services in connection with such clinical trials, and expect to continue to do so for theforeseeable future. Despite having contractual remedies available to us under our agreements with such contractors, we cannot control whether or not theydevote sufficient time, skill and resources to our ongoing development programs. Furthermore, these third parties may also have relationships with otherentities, some of which may be our competitors. These third parties may not complete activities on schedule, or at all, or may not conduct our clinical trials inaccordance with the established clinical trial protocol or design. In addition, the FDA and its foreign equivalents require us to comply with certain standards,referred to as “good clinical practices,” and applicable regulatory requirements, for conducting, recording and reporting the results of clinical trials. Theserequirements assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected.Our reliance on third parties does not relieve us of these responsibilities and requirements. If any of our third party contractors do not comply with goodclinical practices or other applicable regulatory requirements, we may not be able to use the data and reported results from the applicable trial. Any failure bya third party to conduct our clinical trials as planned or in accordance with regulatory requirements could delay or otherwise adversely affect our efforts toobtain regulatory approvals for and commercialize our drug candidates.We depend on third parties to produce our drug candidates, and if these third parties do not successfully formulate or manufacture these drugcandidates, our business will be harmed.We have no internal manufacturing experience or capabilities, and therefore cannot manufacture any of our drug candidates on a either a clinical orcommercial scale. In order to continue to develop drug candidates, apply for regulatory approvals, and commercialize drugs, we or any collaborators must beable to manufacture drug candidates in adequate clinical and commercial quantities, in compliance with regulatory requirements, including those related toquality control and quality assurance, at acceptable costs and in a timely manner. The manufacture of our drug candidates may be complex, difficult toaccomplish and difficult to scale-up when large-scale production is required. Manufacture may be subject to delays, inefficiencies and low yields of qualitydrugs. The cost of manufacturing some of our drug candidates may make them prohibitively expensive.To the extent that we or any collaborators seek to enter into manufacturing arrangements with third parties, we and such collaborators will depend uponthese third parties to perform their obligations in a timely and effective manner and in accordance with government regulations. We may be unable toestablish any agreements with contract manufacturers or todo so on acceptable terms. Contract manufacturers may breach their manufacturing agreements because of factors beyond our and our collaborators’ controlor may terminate or fail to renew a manufacturing agreement based on their own business priorities, becoming costly and/or inconvenient for us and ourcollaborators. Even if we are able to establish agreements withcontract manufacturers, reliance on contract manufacturers entails additional risks, including:•manufacturing delays if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise donot satisfactorily perform according to the terms of the agreements between us and them, or if unforeseen events in the manufacturing process arise;•the failure of third-party contractors to comply with applicable regulatory requirements;•the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not beingproperly identified;•the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not beingdistributed to commercial vendors in a timely manner, resulting in lost sales; and•the possible misappropriation of our proprietary information, including our trade secrets and know-how.Any manufacturing problem, the loss of a contract manufacturer or any loss of storage could be disruptive to our operations, delay our clinical trialsand, if our products are approved for sale, result in lost sales.Any contract manufacturers with whom we or our collaborators enter into manufacturing arrangements will be subject to ongoing periodic,unannounced inspection by the FDA and state and foreign agencies or their designees to ensure strict compliance with current good manufacturing practicesand other governmental regulations and corresponding foreign47Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsstandards. Any failure by contract manufacturers, collaborators, or us to comply with applicable regulations could result in sanctions being imposed,including fines, injunctions, civil penalties, denial by regulatory authorities of marketing approval for drug candidates, delays, suspension or withdrawal ofapprovals, imposition of clinical holds, seizures or recalls of drug candidates, operating restrictions and criminal prosecutions, any of which couldsignificantly and adversely affect our business. If we or a collaborator need to change manufacturers, the FDA and corresponding foreign regulatory agenciesmust approve any new manufacturers in advance. This would involve testing and pre-approval inspections to ensure compliance with FDA and foreignregulations and standards.If third-party manufacturers fail to perform their obligations, our competitive position and ability to generate revenue may be adversely affected in anumber of ways, including;•we, and any collaborators, may not be able to initiate or continue certain preclinical and/or clinical trials of our drug candidates underdevelopment;•we, and any collaborators, may be delayed in submitting applications for regulatory approvals for our drug candidates; and•we, and any collaborators, may not be able to meet commercial demand for any approved drug products.Because we rely on a limited number of suppliers for the raw materials used in our drug candidates, any delay or interruption in the supply of such rawmaterials could lead to delays in the manufacture and supply of our drug candidates.We rely on third parties to supply certain raw materials necessary to produce our drug candidates for preclinical studies and clinical trials. There are asmall number of suppliers for certain raw materials that we use to manufacture our drug candidates. We purchase these materials from our suppliers on apurchase order basis and do not have long-term supply agreements in place. Any reliance on suppliers may involve several risks, including a potentialinability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption toour contract manufacturing caused by problems at suppliers could delay shipment of our product candidates, increase our cost of goods sold and result in lostsales with respect to any approved products. Although we generally do not begin a preclinical study or clinical trial unless we believe we have a sufficientsupply of a drug candidate to complete such study or trial, any significant delay in the supply of raw materials for our drug candidates for a preclinical studyor an ongoing clinical trial due to the need to replace a third-party supplier could considerably delay completion of certain preclinical studies and/or clinicaltrials. Moreover, if we are unable to purchase sufficient raw materials after regulatory approval for our drug candidates, the commercial launch of our drugcandidates could be delayed, or there could be a supply shortage, each of which would impair our ability to generate revenues from their sale.Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary componentscould result in delays in our clinical development or marketing schedules.Any contamination could materially adversely affect our ability to produce drug candidates on schedule and could, therefore, harm our results ofoperations and cause reputational damage. A material shortage, contamination, recall or restriction on the use of substances in the manufacture of our drugcandidates, or the failure of any of our key suppliers to deliver necessary components required for the manufacture of our drug candidates, could adverselyimpact or disrupt the commercial manufacture or the production of clinical material, which could materially and adversely affect our development timelinesand our business, financial condition, results of operations, and future prospects.RISKS RELATING TO EMPLOYEE MATTERS AND MANAGING GROWTHIf we are not able to attract and retain key management and scientific personnel and advisors, we may not successfully develop our drug candidates orachieve our other business objectives.We depend upon our senior management team. The loss of the service of any of the key members of our senior management may significantly delay orprevent the achievement of drug development and other business objectives. Our officers all serve pursuant to “at will” employment arrangements and canterminate their employment with us at any time. In the future, we may be dependent on other members of our management, scientific and development team.Our ability to compete in the biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial,scientific and medical personnel. Our industry has experienced a high rate of turnover of management personnel in recent years. If we lose one or more of ourexecutive officers or other key employees, our ability to successfully implement our business strategy could be seriously harmed. Furthermore, replacingexecutive officers or other key employees may be difficult and take an extended period of time because of the limited number of individuals in our industry48Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentswith the breadth of skills and experience required to develop, market and commercialize drugs successfully. Competition to hire from this limited pool isintense, and we may be unable to hire, train, retain or motivate these additional key employees on acceptable terms given the competition among numerouspharmaceutical and biotechnology companies for similarly qualified personnel. We also experience competition for the hiring of scientific and clinicalpersonnel from universities and research institutions.We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development andcommercialization strategy. Our consultants and advisors may be employed by other entities and may have commitments under consulting or advisorycontracts with those entities that may limit their availability to us. If we are unable to continue to attract and retain highly qualified personnel, our ability todevelop and commercialize our drug candidates will be limited.We may seek to acquire complementary businesses and technologies or otherwise seek to expand our operations and grow our business, which maydivert management resources and adversely affect our financial condition and operating results.We may seek to expand our operations, including through internal growth and/or the acquisition of businesses and technologies that we believe are astrategic complement to our business model. We may not be able to identify suitable acquisition candidates or expansion strategies and successfullycomplete such acquisitions or successfully execute any such other expansion strategies. We may never realize the anticipated benefits of any efforts toexpand our business. Furthermore, the expansion of our business, either through internal growth or through acquisitions, poses significant risks to ourexisting operations, financial condition and operating results, including:•a diversion of management attention from our existing operations;•increased operating complexity of our business, requiring greater personnel and resources;•significant additional cash expenditures to expand our operations and acquire and integrate new businesses and technologies;•unanticipated expenses and potential delays related to integration of the operations, technology and other resources of any acquired companies;•uncertainty related to the value, benefits or legitimacy of intellectual property or technologies acquired;•retaining and assimilating key personnel and the potential impairment of relationships with our employees;•incurrence of debt, other liabilities and contingent liabilities, including potentially unknown contingent liabilities; and•dilutive stock issuances.RISKS RELATING TO OUR INTELLECTUAL PROPERTYWe may not be able to obtain and maintain patent protection for our technologies and drugs, our licensors may not be able to obtain and maintainpatent protection for the technology or drugs that we license from them, and the patent protection we or they do obtain may not be sufficient to stop ourcompetitors from using similar technology.The long-term success of our business depends in significant part on our ability to:•obtain patents to protect our technologies and discoveries;•protect trade secrets from disclosure to competitors;•operate without infringing upon the proprietary rights of others; and•prevent others from infringing on our proprietary rights.The patent positions of pharmaceutical and life science companies, including ours, are generally uncertain and involve complex legal, scientific andfactual questions. The laws, procedures and standards that the U.S. Patent and Trademark Office and various foreign intellectual property offices use to grantand maintain patents, and the standards that courts use to interpret patents, are not always applied predictably or uniformly and have changed in significantways and are expected to continue to change. In addition, the laws of foreign countries may not protect our rights to the same extent or in the same manner asthe laws of the U.S. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does.Consequently, the level of protection, if any, that will be obtained and provided by our patents if we attempt to enforce them, and they are challenged, isuncertain.49Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPatents may not issue from any of the patent applications that we own or license. If patents do issue, the type and extent of patent claims issued to usmay not be sufficient to protect our technology from exploitation by our competitors. Our patents also may not afford us protection against competitors withsimilar technology. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to thepatent. Prior to March 16, 2013, in the United States, patent applications were subject to a “first to invent” rule of law. Applications filed on or afterMarch 16, 2013 (with the exception of certain applications claiming priority to applications filed prior to March 16, 2013, such as continuations anddivisionals) are subject to new laws including a “first to file” rule of law. Publications of discoveries in the scientific literature often lag behind the actualdiscoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all.Additionally, how the U.S. Patent & Trademark Office and U.S. courts will interpret the new laws remains significantly uncertain at this time. We cannot becertain that any existing or future application will be subject to the “first to file” or “first to invent” rule of law, that we were the first to make the inventionsclaimed in our existing patents or pending patent applications subject to the prior laws, or that we were the first to file for patent protection of suchinventions subject to the new laws.We may not have rights under patents that may cover one or more of our drug candidates. Patents of others may overlap with our own patents regardingone or more of our drug candidates. In some cases, these patents may be owned or controlled by third-party competitors and may prevent or impair our abilityto exploit our technology. As a result, we or our current or potential future collaborative partners may be required to obtain licenses under third-party patentsto develop and commercialize some of our drug candidates. If we are unable to secure licenses to such patented technology on acceptable terms, we or ourcollaborative partners may not be able to develop and commercialize the affected drug candidate or candidates.It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain thepatents, covering technology or drugs that we license from third parties and are reliant on our licensors. For example, while under our collaboration withAurigene we have established a joint patent team to coordinate efforts on patent filing, prosecution, maintenance and other patent matters, we do not controlthe patent process until we have exercised our option to obtain an exclusive license on a program-by-program basis. If we do not control the filing,prosecution of certain patent rights, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with thebest interests of our business.The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may bechallenged in courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidatedor held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and drugs, or limit theduration of the patent protection of our technology and drugs. Given the amount of time required for the development, testing, and regulatory review of newdrug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned andlicensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing drugs similar or identical to ours.We may become involved in expensive and unpredictable patent litigation or other contentious intellectual property proceedings, which could result inliability for damages or require us to cease our development and commercialization efforts.There are substantial threats of litigation and other adversarial opposition proceedings regarding patent and other intellectual property rights in thepharmaceutical and life science industries. We may become a party to patent litigation or other proceedings regarding intellectual property rights.Situations that may give rise to patent litigation or other disputes over the use of our intellectual property include:•initiation of litigation or other proceedings against third parties to enforce our patent rights, to seek to invalidate the patents held by third parties orto obtain a judgment that our drug candidates do not infringe such third parties’ patents;•participation in interference and/or derivation proceedings to determine the priority of invention if our competitors file U.S. patent applicationsthat claim technology also claimed by us;•initiation of opposition, reexamination, post grant review or inter partes review proceedings by third parties that seek to limit or eliminate the scopeof our patent protection;•initiation of litigation by third parties claiming that our processes or drug candidates or the intended use of our drug candidates infringes theirpatent or other intellectual property rights; and50Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•initiation of litigation by us or third parties seeking to enforce contract rights relating to intellectual property that may be important to ourbusiness.Any patent litigation or other proceeding, even if resolved favorably, will likely require us to incur substantial costs and be a distraction tomanagement. Some of our competitors may be able to sustain the cost of such litigation or other proceedings more effectively than we can because of theirsubstantially greater financial resources. In addition, our collaborators and licensors may have rights to file and prosecute claims of infringement of certain ofour intellectual property, and we are reliant on them. If a patent litigation or other intellectual property proceeding is resolved unfavorably, we or anycollaborative partners may be enjoined from manufacturing or selling our future drugs without a license from the other party and be held liable for significantdamages. Moreover, we may not be able to obtain required licenses on commercially acceptable terms or any terms at all. In addition, we could be held liablefor lost profits if we are found to have infringed a valid patent, or liable for treble damages if we are found to have willfully infringed a valid patent.Litigation results are highly unpredictable, and we or any collaborative partner may not prevail in any patent litigation or other proceeding in which we maybecome involved. Any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position.Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could damage our ability to compete in the marketplace.We face risks relating to the enforcement of our intellectual property rights in China and India that could adversely affect our business.We have conducted chemical development work through contract research agreements with contract research organizations, or CROs, in China andIndia. We seek to protect our intellectual property rights under this arrangement through, among other things, non-disclosure and assignment of inventioncovenants. Enforcement of intellectual property rights and confidentiality protections in China may not be as effective as in the U.S. or other countries.Policing unauthorized use of proprietary technology is difficult and expensive, and we might need to resort to litigation to enforce or defend patents issuedto us or to determine the enforceability, scope and validity of our proprietary rights or those of others. The experience and capabilities of Chinese courts inhandling intellectual property litigation vary, and outcomes are unpredictable. Further, such litigation may require significant expenditure of cash andmanagement efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigation will impairour intellectual property rights and may harm our business, prospects and reputation.In addition, we collaborate with Aurigene, an Indian company, in the development of new therapeutic compounds. Some or all of the intellectualproperty arising from this collaboration may be developed by Aurigene’s employees, consultants, and third-party contractors, and we have an option rightunder the collaboration agreement to obtain exclusive licenses to Aurigene’s rights in this intellectual property. Accordingly, our rights depend in part onAurigene’s contracts with its employees and contractors and Aurigene’s ability to protect its trade secrets and other confidential information in India, bothbefore and after we exercise our option to obtain exclusive license rights on a program-by-program basis. Enforcement of intellectual property rights andconfidentiality protections in India may not be as effective as in the U.S. or other countries. Policing unauthorized use of proprietary technology is difficultand expensive, and we or Aurigene might need to resort to litigation to protect our trade secrets and confidential information. The experience and capabilitiesof Indian courts in handling intellectual property litigation vary, and outcomes are unpredictable. Further, such litigation may require significant expenditureof cash and management efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigationwould impair our intellectual property rights and may harm our business, prospects and reputation.If we are unable to keep our trade secrets confidential, our technology and proprietary information may be used by competitors.We rely heavily on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position.We seek to protect this information through confidentiality and intellectual property license or assignment provisions in agreements with our employees,consultants and other third-party contractors, including our contract research agreements with CROs in China and India, as well as through other securitymeasures. Similarly, our agreement with Aurigene requires Aurigene to enter into such agreements with its employees, consultants, and other third-partycontractors. The confidentiality and intellectual property provisions of our agreements and security measures may be breached, and we or they may not haveadequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors.If we fail to comply with our obligations in the agreements under which we license rights to technology from third parties, we could lose license rightsthat are important to our business.51Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe are party to agreements that provide us licenses of intellectual property or sharing of rights to intellectual property that is important to our business,and we may enter into additional agreements in the future that provide us licenses to valuable technology. These licenses, including our agreement withAurigene, impose, and future licenses may impose, various commercialization, milestone and other obligations on us, including the obligation to terminateour use of licensed subject matter under certain contingencies. If a licensor becomes entitled to, and exercises, termination rights under a license, we wouldlose valuable rights and could lose our ability to develop our drugs. We may need to license other intellectual property to commercialize future drugs. Ourbusiness may suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by thirdparties, if the licensed patents or other rights are found to be invalid, or if we are unable to enter into necessary licenses on acceptable terms.We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology orpharmaceutical companies, including our current and potential competitors. Although no claims against us are currently pending, we may be subject toclaims that such employees, or as a result, we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their formeremployers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result insubstantial costs and be a distraction to management.RISKS RELATING TO REGULATORY APPROVAL AND MARKETING OF OUR DRUG CANDIDATES AND OTHER LEGAL COMPLIANCEMATTERSEven if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time consuming and uncertainand may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our drug candidates. As a result,we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a drugcandidate.The research, testing, manufacturing, labeling, approval, selling, marketing, promotion and distribution of drugs are subject to extensive regulation bythe FDA and comparable foreign regulatory authorities. We, and any future collaborators, are not permitted to market our drug candidates in the United Statesor in other countries until we, or they, receive approval of an NDA from the FDA or marketing approval from applicable regulatory authorities outside theUnited States. Our drug candidates are in various stages of development and are subject to the risks of failure inherent in drug development. We have notsubmitted an application for or received marketing approval for any of our drug candidates in the United States or in any other jurisdiction. We have limitedexperience in conducting and managing the clinical trials necessary to obtain marketing approvals, including FDA approval of an NDA.The process of obtaining marketing approvals, both in the United States and abroad, is lengthy, expensive and uncertain. It may take many years, ifapproval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidatesinvolved. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatoryauthorities for each therapeutic indication to establish the drug candidate’s safety and efficacy. Securing marketing approval also requires the submission ofinformation about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatoryauthorities may determine that our drug candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects,toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. Moreover, the FDA or other regulatoryauthorities may fail to approve the companion diagnostics we contemplate developing with partners. Any marketing approval we ultimately obtain may belimited or subject to restrictions or post-approval commitments that render the approved drug not commercially viable.In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes,regulations or guidance or changes in regulatory review for each submitted drug application, may cause delays in the approval or rejection of an application.Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data areinsufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinicaland clinical testing could delay, limit or prevent marketing approval of a drug candidate. Any marketing approval we, or any future collaborators, ultimatelyobtain may be limited or subject to restrictions or post-approval commitments that render the approved drug not commercially viable.Any delay in obtaining or failure to obtain required approvals could negatively affect our ability or that of any future collaborator to generate revenuefrom the particular drug candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.52Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsFailure to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being marketed abroad. Any approval we aregranted for our drug candidates in the United States would not assure approval of our drug candidates in foreign jurisdictions.In order to market and sell our drugs in the European Union and other foreign jurisdictions, we, and any future collaborators, must obtain separatemarketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involveadditional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval processoutside the United States generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the United States,a drug must be approved for reimbursement before the drug can be approved for sale in that country. We, and any future collaborators, may not obtainapprovals from regulatory authorities outside the United States on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatoryauthorities in other countries or jurisdictions, and approval by one regulatory authority outside the United States does not ensure approval by regulatoryauthorities in other countries or jurisdictions or by the FDA. We may file for marketing approvals but not receive the necessary approvals to commercializeour drugs in any market.Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit.On March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Since asignificant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, the referendum couldmaterially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union. Any delay inobtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our productcandidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any ofthese outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our productcandidates, which could significantly and materially harm our business.We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our drug candidates and, even if wedo, that exclusivity may not prevent the FDA or the EMA from approving competing drugs.Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations asorphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition,which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States. We, or any future collaborators, may seekorphan drug designations for drug candidates and may be unable to obtain such designations.Even if we, or any future collaborators, obtain orphan drug designation for a drug candidate, we, or they, may not be able to obtain orphan drugexclusivity for that drug candidate. Generally, a drug with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the firstmarketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving anothermarketing application for the same drug for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in theUnited States and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drugdesignation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or theEMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet theneeds of patients with the rare disease or condition.Even if we, or any future collaborators, obtain orphan drug exclusivity for a drug, that exclusivity may not effectively protect the drug fromcompetition because different drugs can be approved for the same condition and the same drug can be approved for different conditions. Even after an orphandrug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior inthat it is shown to be safer, more effective or makes a major contribution to patient care.Even if we, or any future collaborators, obtain marketing approvals for our drug candidates, the terms of approvals and ongoing regulation of ourdrugs may limit how we manufacture and market our drugs, which could impair our ability to generate revenue.Once marketing approval has been granted, an approved drug and its manufacturer and marketer are subject to ongoing review and extensiveregulation. We, and any future collaborators, must therefore comply with requirements concerning advertising and promotion for any of our drug candidatesfor which we or they obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal andregulatory restrictions and must be53Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsconsistent with the information in the drug’s approved labeling. Thus, we and any future collaborators will not be able to promote any drugs we develop forindications or uses for which they are not approved.In addition, manufacturers of approved drugs and those manufacturers’ facilities are required to comply with extensive FDA requirements, includingensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assuranceas well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, any future collaboratorsand their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.Accordingly, assuming we, or any future collaborators, receive marketing approval for one or more of our drug candidates, we, and any futurecollaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, includingmanufacturing, production, drug surveillance and quality control.If we, and any future collaborators, are not able to comply with post-approval regulatory requirements, we, and any future collaborators, could have themarketing approvals for our drugs withdrawn by regulatory authorities and our, or any future collaborators’, ability to market any future drugs could belimited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post-approval regulations may have anegative effect on our operating results and financial condition.Any of our drug candidates for which we, or any future collaborators, obtain marketing approval in the future could be subject to post-marketingrestrictions or withdrawal from the market and we, or any future collaborators, may be subject to substantial penalties if we, or they, fail to comply withregulatory requirements or if we, or they, experience unanticipated problems with our drugs following approval.Any of our drug candidates for which we, or any future collaborators, obtain marketing approval, as well as the manufacturing processes, post-approvalstudies and measures, labeling, advertising and promotional activities for such drug, among other things, will be subject to ongoing requirements of andreview by the FDA and other regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports,registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of recordsand documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a drug candidate isgranted, the approval may be subject to limitations on the indicated uses for which the drug may be marketed or to the conditions of approval, including therequirement to implement an FDA-sanctioned Risk Evaluation and Mitigation Strategy.The FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a drug.The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post-approval marketing and promotion of drugs toensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approvedlabeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off-label use and if we, or any future collaborators, do notmarket any of our drug candidates for which we, or they, receive marketing approval for only their approved indications, we, or they, may be subject towarnings or enforcement action for off-label marketing. Violation of the United States Federal Food, Drug, and Cosmetic Act and other statutes, including theFalse Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and statehealthcare fraud and abuse laws and state consumer protection laws.In addition, later discovery of previously unknown adverse events or other problems with our drugs or their manufacturers or manufacturing processes,or failure to comply with regulatory requirements, may yield various results, including:•restrictions on such drugs, manufacturers or manufacturing processes;•restrictions on the labeling or marketing of a drug;•restrictions on drug distribution or use;•requirements to conduct post-marketing studies or clinical trials;•warning letters or untitled letters;•withdrawal of the drugs from the market;•refusal to approve pending applications or supplements to approved applications that we submit;•recall of drugs;54Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•restrictions on coverage by third-party payors;•fines, restitution or disgorgement of profits or revenues;•suspension or withdrawal of marketing approvals;•refusal to permit the import or export of drugs;•drug seizure; or•injunctions or the imposition of civil or criminal penalties.We may seek a Breakthrough Therapy designation for one or more of our drug candidates, but we might not receive such designation, and even if wedo, such designation may not lead to a faster development or regulatory review or approval process.We may seek a Breakthrough Therapy designation for one or more of our drug candidates. A Breakthrough Therapy is defined as a drug that isintended, alone or in combination with one or more other drugs, to treat a serious condition, and preliminary clinical evidence indicates that the drug maydemonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observedearly in clinical development. For drug candidates that have been designated Breakthrough Therapies, interaction and communication between the FDA andthe sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffectivecontrol regimens. Drugs designated Breakthrough Therapies by the FDA may also be eligible for priority review if supported by clinical data at the time theNDA is submitted to the FDA.Designation as a Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our drug candidates meets thecriteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. Even if we receiveBreakthrough Therapy designation, the receipt of such designation for a drug candidate may not result in a faster development or regulatory review orapproval process compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. Inaddition, even if one or more of our drug candidates qualify as Breakthrough Therapies, the FDA may later decide that the drug candidates no longer meet theconditions for qualification or decide that the time period for FDA review or approval will not be shortened.We may seek Fast Track designation for one or more of our drug candidates, but we might not receive such designation, and even if we do, suchdesignation may not actually lead to a faster development or regulatory review or approval process.If a drug is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical needfor this condition, a drug sponsor may apply for FDA Fast Track designation. If we seek Fast Track designation for a drug candidate, we may not receive itfrom the FDA. However, even if we receive Fast Track designation, Fast Track designation does not ensure that we will receive marketing approval or thatapproval will be granted within any particular timeframe. We may not experience a faster development or regulatory review or approval process with FastTrack designation compared to conventional FDA procedures. In addition, the FDA may withdraw Fast Track designation if it believes that the designation isno longer supported by data from our clinical development program. Fast Track designation alone does not guarantee qualification for the FDA’s priorityreview procedures.Under the CURES Act and the Trump Administration’s regulatory reform initiatives, the FDA’s policies, regulations and guidance may be revised orrevoked and that could prevent, limit or delay regulatory approval of our product candidates, which would impact our ability to generate revenue.In December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize theregulation of drugs and spur innovation, but its ultimate implementation is unclear. If we are slow or unable to adapt to changes in existing requirements orthe adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may haveobtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executiveaction, either in the United States or abroad. For example, certain policies of the Trump Administration may impact our business and industry. Namely, theTrump Administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on,or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through55Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrulemaking, issuance of guidance, and review and approval of marketing applications. An under-staffed FDA could result in delays in the FDA’sresponsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in atimely fashion or at all. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA,which requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existingregulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes abudget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be nogreater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offsetany incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interimguidance issued by the Office of Information and Regulatory Affairs within OMB on February 2, 2017, the administration indicates that the “two-for-one”provisions may apply not only to agency regulations, but also to significant agency guidance documents. In addition, on February 24, 2017, President Trumpissued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer” and establish a “RegulatoryReform Task Force” to implement the two-for-one provisions and other previously issued executive orders relating to the review of federal regulations,however it is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise itsregulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normalcourse, our business may be negatively impacted.Current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval and commercializeour drug candidates and affect the prices we, or they, may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding thehealthcare system that could, among other things, prevent or delay marketing approval of our drug candidates, restrict or regulate post-approval activities andaffect our ability, or the ability of any future collaborators, to profitably sell any drugs for which we, or they, obtain marketing approval. We expect thatcurrent laws, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additionaldownward pressure on the price that we, or any future collaborators, may receive for any approved drugs.Among the provisions of the Patient Protection and Affordable Care Act, or ACA, of potential importance to our business and our drug candidates arethe following:•an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;•an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;•expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new governmentinvestigative powers and enhanced penalties for noncompliance;•a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiatedprices to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under MedicarePart D;•extension of manufacturers’ Medicaid rebate liability;•expansion of eligibility criteria for Medicaid programs;•expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;•new requirements to report certain financial arrangements with physicians and teaching hospitals;•a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and•a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research,along with funding for such research.Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which,among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and will stay in effectthrough 2024 unless additional Congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicarepayments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three tofive years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for anyof our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used.Further, there have been several recent U.S. congressional inquiries56Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsand proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricingand manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drugproducts.We expect that these healthcare reforms, as well as other healthcare reform measures that may be adopted in the future, may result in additionalreductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on theprice that we receive for any approved product and/or the level of reimbursement physicians receive for administering any approved product we might bringto market. Reductions inreimbursement levels may negatively impact the prices we receive or the frequency with which our products are prescribedor administered. Any reduction in reimbursement from Medicare or other government programs may result in a similarreduction in payments from private payors.Since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the law. In May2017, the U.S. House of Representatives passed legislation known as the American Health Care Act of 2017. Thereafter, the Senate Republicans introducedand then updated a bill to replace the ACA known as the Better Care Reconciliation Act of 2017. The Senate Republicans also introduced legislation torepeal the ACA without companion legislation to replace it, and a “skinny” version of the Better Care Reconciliation Act of 2017. In addition, the Senateconsidered proposed healthcare reform legislation known as the Graham-Cassidy bill. None of these measures was passed by the U.S. Senate.The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. In January 2017, President Trumpsigned an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay theimplementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, ormanufacturers of pharmaceuticals or medical devices. In October 2017, the President signed a second Executive Order allowing for the use of associationhealth plans and short-term health insurance, which may provide fewer health benefits than the plans sold through the ACA exchanges. At the same time, theAdministration announced that it will discontinue the payment of cost sharing reduction (CSR) payments to insurance companies until Congress approvesthe appropriation of funds for such CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualifiedhealth plans under the ACA. A bipartisan bill to appropriate funds for CSR payments was introduced in the Senate, but the future of that bill is uncertain.More recently, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the“individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will become effective in2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 andpremiums in insurance markets may rise.Further, each chamber of the Congress has put forth multiple bills designed to repeal or repeal and replace portions of the ACA. Although none of thesemeasures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the ACA. The Congress will likelyconsider other legislation to replace elements of the ACA, during the next Congressional session. We will continue to evaluate the effect that the ACA and itspossible repeal and replacement could have on our business.We will continue to evaluate the effect that the ACA and its possible repeal and replacement could have on our business.It is possible that repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverageor in individuals having insurance coverage with less generous benefits. While the timing and scope of any potential future legislation to repeal and replaceACA provisions is highly uncertain in many respects, it is also possible that some of the ACA provisions that generally are not favorable for the research-based pharmaceutical industry could also be repealed along with ACA coverage expansion provisions.Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully developand for which we may obtain marketing approval and may affect our overall financial condition and ability to develop or commercialize product candidates.The costs of prescription pharmaceuticals in the United States has also been the subject of considerable discussion in the United States, and members ofCongress and the Administration have stated that they will address such costs through new legislative and administrative measures. The pricing ofprescription pharmaceuticals is also subject to governmental control outside the United States. In these countries, pricing negotiations with governmentalauthorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries,we may be required to conduct a clinical trial that compares the cost effectiveness of our product candidates to other available therapies.57Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIf reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues andbecome profitable could be impaired.Moreover, legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activitiesfor pharmaceutical drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance orinterpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increasedscrutiny by the United States Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and anyfuture collaborators to more stringent drug labeling and post-marketing testing and other requirements.Governments outside the United States tend to impose strict price controls, which may adversely affect our revenues, if any.In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In thesecountries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug. To obtainreimbursement or pricing approval in some countries, we, or any future collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our drug to other available therapies. If reimbursement of our drugs is unavailable or limited in scope or amount, or if pricing is set atunsatisfactory levels, our business could be harmed.We may be subject to certain healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages,reputational harm, fines, disgorgement, exclusion from participation in government healthcare programs, curtailment or restricting of our operations,and diminished profits and future earnings.Healthcare providers, third-party payors and others will play a primary role in the recommendation and prescription of any drugs for which we obtainmarketing approval. Our future arrangements with healthcare providers and third-party payors will expose us to broadly applicable fraud and abuse and otherhealthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute anydrugs for which we obtain marketing approval. Potentially applicable U.S. federal and state healthcare laws and regulations include the following:Anti-Kickback Statute. The federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting,offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or thepurchase, order or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare andMedicaid;False Claims Laws. The federal false claims laws, including the civil False Claims Act, impose criminal and civil penalties, including those from civilwhistleblower or qui tam actions against individuals or entities for knowingly presenting, or causing to be presented to the federal government claims forpayment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;HIPAA. The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal and civil liability for executing orattempting to execute a scheme to defraud any healthcare benefit program;HIPAA and HITECH. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, alsoimposes obligations on certain types of individuals and entities, including mandatory contractual terms, with respect to safeguarding the privacy, securityand transmission of individually identifiable health information;False Statements Statute. The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact ormaking any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;Transparency Requirements. The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics, and medicalsupplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annuallyto the U.S. Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership andinvestment interests; andAnalogous State and Foreign Laws. Analogous state laws and regulations, such as state anti-kickback and false claims laws, and transparency laws,may apply to sales or marketing arrangements, and claims involving healthcare items or services reimbursed by non-governmental third-party payors,including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary complianceguidelines and the relevant compliance guidance promulgated by the federal government, in addition to requiring drug manufacturers to report informationrelated to58Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentspayments to physicians and other healthcare providers or marketing expenditures. Many state laws also govern the privacy and security of health informationin some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating complianceefforts. Foreign laws also govern the privacy and security of health information in many circumstances.Efforts to ensure that our business arrangements with third parties, and our business generally, will comply with applicable healthcare laws andregulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with currentor future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be inviolation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrativepenalties, damages, fines, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, disgorgement,contractual damages, and reputational harm, any of which could substantially disrupt our operations. If any of the physicians or other providers or entitieswith whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions,including exclusions from government funded healthcare programs.We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such lawscan subject us to criminal and/or civil liability and harm our business.We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which weconduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venturepartners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the publicor private sector. We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals,universities, and other organizations. In addition, we may engage third party intermediaries to promote our clinical research activities abroad and/or to obtainnecessary permits, licenses, and other regulatory approvals. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries,our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.We have adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics mandates compliance with the FCPA and otheranti-corruption laws applicable to our business throughout the world. However, we cannot assure you that our employees and third party intermediaries willcomply with this code or such anti-corruption laws. Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblowercomplaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil andcriminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adversemedia coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or governmental or othersanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could bematerially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources andsignificant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independentcompliance monitor which can result in added costs and administrative burdens.We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensingrequirements and subject us to liability if we are not in compliance with applicable laws.Our drug products and other materials are subject to export control and import laws and regulations, including the U.S. Export AdministrationRegulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office ofForeign Assets Controls. Exports of our drugs and solutions outside of the United States must be made in compliance with these laws and regulations. If wefail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including thepossible loss of export or import privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, theincarceration of responsible employees or managers.In addition, changes in our drugs or solutions or changes in applicable export or import laws and regulations may create delays in the introduction,provision, or sale of our drugs and solutions in international markets, prevent customers from using our drugs and solutions or, in some cases, prevent theexport or import of our drugs and solutions to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sellour drugs and solutions could adversely affect our business, financial condition and results of operations.59Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIf we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that couldharm our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling,use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardousand flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with thirdparties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from thesematerials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resultingdamages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure tocomply with such laws and regulations.We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the useof hazardous materials, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance forenvironmental liability or toxic tort claims that may be asserted against us.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current orfuture environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws andregulations may result in substantial fines, penalties or other sanctions.Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The most recentglobal financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the mostrecent global financial crisis, could result in a variety of risks to our business, including weakened demand for our drug candidate and our ability to raiseadditional capital when needed on acceptable terms, if at all. This is particularly true in the European Union, which is undergoing a continued severeeconomic crisis. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our servicesby third-party payors or our collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the currenteconomic climate and financial market conditions could adversely impact our business.Our internal computer systems, or those of our collaborators or other contractors or consultants, may fail or suffer security breaches, which couldresult in a material disruption of our drug development programs.Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage fromcomputer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced anysuch material system failure, accident or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in adisruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or othersimilar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval effortsand significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damageto, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could beharmed and the further development and commercialization of our drug candidates could be delayed.Our employees may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, whichcould cause significant liability for us and harm our reputation.We are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similar regulationsof comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply withmanufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulationsestablished and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities tous. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatorysanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect andprevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or otheractions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and weare not60Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentssuccessful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, includingthe imposition of significant fines or other sanctions.RISKS RELATING TO OUR COMMON STOCKIf we fail to meet the requirements for continued listing on the Nasdaq Global Market, our common stock could be delisted from trading, which woulddecrease the liquidity of our common stock and our ability to raise additional capital.Our common stock is currently listed for quotation on the Nasdaq Global Market. We are required to meet specified requirements to maintain our listingon the Nasdaq Global Market,including, among other things, a minimum bid price of $1.00 per share. On January 2, 2018, we received a deficiency letterfrom the Listing Qualifications Department, or the Staff, of the Nasdaq Stock Market notifying us that, for the last 30 consecutive business days, the bid pricefor our common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Market. We have beenprovided an initial period of 180 calendar days, or until July 2, 2018, to regain compliance with the minimum bid price requirement. If, at any time beforeJuly 2, 2018, the bid price for our common stock closes at $1.00 or more for a minimum of 10 consecutive trading days, we may be eligible to regaincompliance with the minimum bid price requirement. Under certain circumstances, Nasdaq could require that the bid price exceed $1.00 for more than 10consecutive trading days before determining that we comply with Nasdaq’s continued listing standards. From January 2, 2018, the date of the deficiencyletter, to the date of filing of this Annual Report on Form 10-K, our common stock had not closed above $1.00 on any tradingday.If we fail to satisfy the Nasdaq Global Market’s continued listing requirements, we may transfer to the Nasdaq Capital Market, which generally haslower financial requirements for initial listing, to avoid delisting, or, if we fail to meet its listing requirements, the OTC Bulletin Board. However, we may notbe able to satisfy the initial listing requirements for the Nasdaq Capital Market. A transfer of our listing to the Nasdaq Capital Market or having our commonstock trade on the OTC Bulletin Board could adversely affect the liquidity of our common stock. Any such event could make it more difficult to dispose of,or obtain accurate quotations for the price of, our common stock, and there also would likely be a reduction in our coverage by securities analysts and thenews media, which could cause the price of our common stock to decline further. We may also face other material adverse consequences in such event, suchas negative publicity, a decreased ability to obtain additional financing, diminished investor and/or employee confidence, and the loss of businessdevelopment opportunities, some or all of which may contribute to a further decline in our stock price.Our stock price may fluctuate significantly and the market price of our common stock could drop below the price paid by our investors.The trading price of our common stock has been volatile and is likely to continue to be volatile in the future. For example, our stock traded within arange of a high price of $5.65 and a low price of $0.47 per share for the period January 1, 2012 through March 2, 2018. The stock market, particularly inrecent years, has experienced significant volatility with respect to pharmaceutical and biotechnology company stocks. Prices for our stock will be determinedin the marketplace and may be influenced by many factors, including:•the timing and result of clinical trials of our drug candidates;•the success of, and announcements regarding, existing and new technologies and/or drug candidates by us or our competitors;•regulatory actions with respect to our product candidates or our competitors’ products and product candidates;•market conditions in the biotechnology and pharmaceutical sectors;•rumors relating to us or our collaborators or competitors;•commencement or termination of collaborations for our development programs;•litigation or public concern about the safety of our drug candidates;•actual or anticipated variations in our quarterly operating results and any subsequent restatement of such results;•the amount and timing of any royalty revenue we receive from Genentech related to Erivedge;•actual or anticipated changes to our research and development plans;•deviations in our operating results from the estimates of securities analysts;•entering into new collaboration agreements or termination of existing collaboration agreements;61Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents•adverse results or delays in clinical trials being conducted by us or any collaborators;•any intellectual property disputes or other lawsuits involving us;•third-party sales of large blocks of our common stock;•sales of our common stock by our executive officers, directors or significant stockholders;•equity sales by us of our common stock to fund our operations;•the loss of any of our key scientific or management personnel;•FDA or international regulatory actions;•limited trading volume in our common stock;•general economic and market conditions, including recent adverse changes in the domestic and international financial markets; and•the other factors described in this “Risk Factors” section.While we cannot predict the individual effect that these factors may have on the price of our common stock, these factors, either individually or in theaggregate, could result in significant variations in price during any given period of time.In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type oflitigation could result in substantial costs and divert our management’s attention and resources.We and our collaborators may not achieve projected research, development, commercialization and marketing goals in the time frames that we or theyannounce, which could have an adverse impact on our business and could cause our stock price to decline.We set goals for, and make public statements regarding, the timing of certain accomplishments, such as the commencement and completion ofpreclinical studies, and clinical trials, and other developments and milestones relating to our business and our collaboration agreements. Our collaboratorsmay also make public statements regarding their goals and expectations for their collaborations with us. The actual timing of any such events can varydramatically due to a number of factors including delays or failures in our and our current and potential future collaborators’ preclinical studies or clinicaltrials, the amount of time, effort and resources committed to our programs by all parties, and the inherent uncertainties in the regulatory approval andcommercialization process. As a result:•our or our collaborators’ preclinical studies and clinical trials may not advance or be completed in the time frames we or they announce or expect;•we or our collaborators may not make regulatory submissions, receive regulatory approvals or commercialize approved drugs as predicted; and•we or our collaborators may not be able to adhere to our or their current schedule for the achievement of key milestones under any programs.If we or any collaborators fail to achieve research, development and commercialization goals as planned, our business could be materially adverselyaffected and the price of our common stock could decline.Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.Under Section 382 of the Internal Revenue Code of 1986, as amended, if a company undergoes an “ownership change,” generally defined as a greaterthan 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwardsand other pre-change tax attributes (such as research tax credits) to offset its post-change taxable income or taxes may be limited. Changes in our stockownership, some such changes being out of our control, may have resulted or could in the future result in an ownership change. The changes of ownershipwill result in net operating loss and research and development credit carryforwards that we expect to expire unutilized. If additional limitations were to apply,utilization of a portion of our net operating loss and tax credit carryforwards could be further limited in future periods and a portion of the carryforwardscould expire before being available to reduce future income tax liabilities.The recently passed comprehensive tax reform bill could adversely affect our business and financial condition.On December 22, 2017, President Trump signed into law new legislation that significantly revised the Internal Revenue Code of 1986, as amended. Thenewly enacted federal income tax law, among other things, contains significant changes to corporate taxation, including reduction of the corporate tax ratefrom a top marginal rate of 35% to a flat rate of 21%, limitation62Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsof the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating lossesto 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless ofwhether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain newinvestments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits. Notwithstandingthe reduction in the corporate income tax rate, the overall impact of the new federal tax law is uncertain and our business and financial condition could beadversely affected. In addition, it is uncertain how various states will respond to the newly enacted federal tax law. The impact of this tax reform on holders ofour common stock is also uncertain and could be adverse. We urge our stockholders to consult with their legal and tax advisors with respect to thislegislation and the potential tax consequences of investing in or holding our common stock.Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.We are subject to taxation in numerous U.S. states and territories. As a result, our effective tax rate is derived from a combination of applicable tax ratesin the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places.Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including passage of the newly enacted federalincome tax law, changes in the mix of our profitability from state to state, the results of examinations and audits of our tax filings, our inability to secure orsustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these factors could cause us toexperience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess ofamounts accrued in our financial statements.Future sales of shares of our common stock, including shares issued upon the exercise of currently outstanding options or pursuant to our universalshelf registration statement could result in dilution to our stockholders and negatively affect our stock price.Most of our outstanding common stock can be traded without restriction at any time. As such, sales of a substantial number of shares of our commonstock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell suchshares, could reduce the market price of our common stock. In addition, we have a significant number of shares that are subject to outstanding options and inthe future we may issue additional options, warrants or other derivative securities convertible into our common stock. The exercise of any such options,warrants or other derivative securities, and the subsequent sale of the underlying common stock, could cause a further decline in our stock price. These salesalso might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.We currently have on file with the SEC a “universal” shelf registration statement which allows us to offer and sell registered common stock, preferredstock, and warrants from time to time pursuant to one or more offerings at prices and terms to be determined at the time of sale. In July 2015, we entered into asales agreement with Cowen, pursuant to which, from time to time, we may offer and sell through Cowen up to $30.0 million of the common stock registeredunder the shelf registration statement pursuant to one or more “at the market” offerings. In addition, with our prior written approval, Cowen may sell theseshares of common stock by any other method permitted by law, including in privately negotiated transactions. Sales of substantial amounts of shares of ourcommon stock or other securities under this registration statement could lower the market price of our common stock and impair our ability to raise capitalthrough the sale of equity securities.If we are not able to maintain effective internal controls under Section 404 of the Sarbanes-Oxley Act, our business and stock price could be adverselyaffected.Section 404 of the Sarbanes-Oxley Act of 2002 requires us, on an annual basis, to review and evaluate our internal controls, and requires ourindependent registered accounting firm to attest to the effectiveness of our internal controls. Any failure by us to maintain the effectiveness of our internalcontrols in accordance with the requirements of Section 404 of the Sarbanes-Oxley Act, as such requirements exist today or may be modified, supplementedor amended in the future, could have a material adverse effect on our business, operating results and stock price.We do not intend to pay dividends on our common stock, and any return to investors will come, if at all, only from potential increases in the price of ourcommon stock.We have never declared nor paid cash dividends on our common stock. We currently plan to retain all of our future earnings, if any, to finance theoperation, development and growth of our business. In addition, the terms of any future debt or credit agreements may preclude us from paying dividends. Asa result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.63Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsInsiders have substantial influence over us and could delay or prevent a change in corporate control.As of December 31, 2017, we believe that our directors, executive officers and principal stockholders, together with their affiliates, owned, in theaggregate, approximately 33.0% of our outstanding common stock. As a result, if these stockholders were to choose to act together, they would be able tocontrol all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to acttogether, would control the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentrationof ownership could harm the market price of our common stock by:•delaying, deferring or preventing a change in control of our company;•impeding a merger, consolidation, takeover or other business combination involving our company; or•entrenching our management or the board of directors.If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and tradingvolume could decline.The trading market for our common stock may depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness. We do not have any control over these analysts. There can be no assurance that existing analysts will continue to cover us or that new analysts willbegin to cover us. There is also no assurance that any covering analyst will provide favorable coverage. A lack of research coverage or adverse coverage maynegatively impact the market price of our common stock. In addition, if one or more of our current or potential future analysts downgrade our stock or changetheir opinion of our stock, our share price would likely decline. In addition, if one or more of our current or potential future analysts cease coverage of ourcompany or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume todecline.A decline in our stock price may affect future fundraising efforts.We currently have no drug revenues, and depend entirely on funds raised through other sources. One source of such funding is future debt and/or equityofferings. Our ability to raise funds in this manner depends upon, among other things, our stock price, which may be affected by numerous factors includingwithout limitation capital market conditions, evaluation of our stock by securities analysts, numerous factors including without limitation developmentprograms, and the overall status of our business, finances and operations.We have anti-takeover defenses that could delay or prevent an acquisition that our stockholders may consider favorable, or prevent attempts by ourstockholders to replace or remove current management, which could result in a decline in the price of our common stock.Provisions of our certificate of incorporation, our bylaws, and Delaware law may deter unsolicited takeovers or delay or prevent changes in control ofour management, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices. Inaddition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interest. For example, we havedivided our board of directors into three classes that serve staggered three-year terms, we may issue shares of our authorized “blank check” preferred stock,and our stockholders are limited in their ability to call special stockholder meetings.In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-heldDelaware corporation from engaging in a business combination with an interested stockholder, generally a person who together with his, her, or its affiliatesowns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person becamean interested stockholder, unless the business combination is approved in a prescribed manner. These provisions could discourage, delay or prevent a changein control.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESWe currently lease a facility for our administrative, research and development requirements located at 4 Maguire Road in Lexington, Massachusettsconsisting of 24,529 square feet pursuant to a lease that was set to expire in February 2018. On64Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNovember 1, 2017, we entered into a second amendment to the lease agreement pursuant to which we extended the lease for an additional two-year period.The second amended lease will expire on February 29, 2020. We believe that our existing facility will be sufficient to meet our current needs and thatsuitable additional space will be available if and when needed.ITEM 3.LEGAL PROCEEDINGSWe are currently not a party to any material legal proceedings.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.65Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPART IIITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket Information. Our common stock is traded on the NASDAQ Global Market under the trading symbol “CRIS.” The following table sets forth, forthe fiscal periods indicated, the high and low sales prices per share of our common stock as reported on the NASDAQ Global Market: CurisCommon StockYear ended December 31, 2016 High LowFirst Quarter $2.89 $1.25Second Quarter $2.23 $1.47Third Quarter $2.64 $1.51Fourth Quarter $3.72 $2.28Year ended December 31, 2017 First Quarter $3.38 $2.24Second Quarter $2.87 $1.60Third Quarter $2.27 $1.47Fourth Quarter $1.74 $0.69Holders. On March 2, 2018 the last reported sale price of our common stock per share on the NASDAQ Global Market was $0.52 and there were 199holders of record of our common stock. The number of record holders may not be representative of the number of beneficial owners because many of theshares of our common stock are held by depositories, brokers or other nominees.Dividends. We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings, if any, to support ourbusiness strategy and do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the sole discretion ofour board of directors after taking into account various factors, including our financial condition, operating results, capital requirements and any plans forexpansion.Issuer Purchases of Equity Securities. None.Unregistered Sales of Equity Securities. None.Performance Graph. The graph below compares the cumulative total stockholder return on our common stock for the period from December 31, 2012through December 31, 2017, with the cumulative total return on (i) NASDAQ Pharmaceutical Index, (ii) NASDAQ Composite Index and (iii) NASDAQBiotechnology Index. The comparison assumes investment of $100 on December 31, 2012 in our common stock and in each of the indices and, in each case,assumes reinvestment of all dividends.This graph is not deemed to be “filed” with the SEC or subject to the liabilities of Section 18 of the Exchange Act, and should not be deemed to beincorporated by reference into any of our prior or subsequent filings under the Securities Act or the Exchange Act.66Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCOMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*Among Curis, Inc., the NASDAQ Composite Indexand the NASDAQ Biotechnology Index *$100 invested on December 31, 2012 in stock or index, including reinvestment of dividends. Fiscal year ending December 31, 2012 2013 2014 2015 2016 2017CURIS INC.100.00 82.22 43.73 84.84 89.80 20.41NASDAQ COMPOSITE INDEX100.00 139.89 160.47 171.83 187.03 242.34NASDAQ BIOTECHNOLOGY INDEX100.00 165.93 222.94 249.18 196.00 238.39ITEM 6.SELECTED FINANCIAL DATAThe selected consolidated financial data set forth below have been derived from our consolidated financial statements. These historical results are notnecessarily indicative of results to be expected for any future period. You should read the data set forth below in conjunction with “Management’sDiscussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included elsewhere inthis report. 67Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Year Ended December 31, 2017 2016 2015 2014 2013 (in thousands, except per share data)Consolidated Statement of Operations Data: Revenues: License fees (1)$— $— $— $3,000 $10,000Royalties9,849 7,810 8,031 6,757 3,942Research and development, net (2)49 (283) (153) 86 1,060Total revenues9,898 7,527 7,878 9,843 15,002Costs and expenses: Cost of royalty revenues496 399 406 339 198Research and development45,096 31,590 26,699 13,659 12,927In-process research and development (3)— 17,989 24,348 — —General and administrative14,066 15,588 12,906 11,707 11,293Total costs and expenses59,658 65,566 64,359 25,705 24,418Loss from operations(49,760) (58,039) (56,481) (15,862) (9,416)Other (expense) income: Interest income513 406 277 165 165Other (expense) income(104) (1) 548 — —Interest expense(3,966) (2,777) (3,325) (3,749) (3,842)Change in fair value of warrants (4)— — — 717 771Total other (expense) income(3,557) (2,372) (2,500) (2,867) (2,906)Net loss$(53,317) $(60,411) $(58,981) $(18,729) $(12,322)Net loss per common share (basic and diluted)$(0.36) $(0.45) $(0.48) $(0.22) $(0.15)Weighted average common shares (basic anddiluted)149,133 132,786 123,365 85,975 82,339 (in thousands)As of December 31, 2017 2016 2015 2014 2013Consolidated Balance Sheet Data: Cash, cash equivalents and investments$60,232 $44,485 $82,191 $50,539 $68,906Working capital50,192 34,654 74,743 42,148 53,607Long-term investment—restricted153 153 153 166 180Total assets73,798 57,752 94,965 62,614 80,591Long-term obligations (5)35,703 14,939 19,697 22,763 28,859Accumulated deficit(952,265) (898,948) (838,537) (779,555) (760,827)Total stockholders’ equity23,993 29,266 64,510 29,784 45,174 _______________________(1)During the years ended December 31, 2014 and 2013, we recognized $3.0 million and $10.0 million of revenue for cash payments that we earnedduring each of 2014 and 2013, respectively, under our June 2003 collaboration agreement with Genentech.(2)During the years ended December 31, 2017, 2016, 2015 and 2014, Genentech incurred expenses of $0.2 million, $0.5 million, $0.4 million and $0.2million, respectively. Under our June 2003 collaboration agreement with Genentech, we are obligated to reimburse these expenses. We have recordedthese amounts as contra-revenues, which have been net against research and development revenues for the respective years. During the year ended2013, we recognized $0.7 million of research and development revenue for milestone payments that we earned under our November 2011 agreementwith LLS.68Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents(3)During the years ended December 31, 2016 and 2015, we recognized in-process research and development charges of $18.0 million and $24.3million, related to the amendment or upfront consideration under our Aurigene and Genentech IAP license agreements, each respectively.(4)During the years ended December 31, 2014 and 2013, we recorded non-cash charges related to a change in the fair value of our warrant liability,established in connection with our registered direct offering in January 2010. All of the outstanding warrants at December 31, 2014 expired,unexercised, on January 27, 2015 in accordance with the warrant terms.(5)Long-term obligations are comprised of the following: (in thousands)As of December 31, 2017 2016 2015 2014 2013Long-term debt, net$35,669 $14,921 $19,558 $22,589 $27,945Warrants— — — — 717Deferred rent payments34 18 139 174 197Total long-term obligations$35,703 $14,939 $19,697 $22,763 $28,859ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe following discussion and analysis of financial condition and results of operations should be read together with “Selected Financial Data,” andour financial statements and accompanying notes appearing elsewhere in this report. This discussion contains forward-looking statements, based oncurrent expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differmaterially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth under Item 1A, “RiskFactors” and elsewhere in this report.OverviewWe are a biotechnology company seeking to develop and commercialize innovative and effective drug candidates for the treatment of human cancers.Our clinical stage drug candidates are CUDC-907, which we are currently in discussions with the FDA that we anticipate will facilitate our determination ofthe most appropriate regulatory path for which our Phase 2 study in patients with relapsed refractory DLBCL, including those with MYC alterations isongoing, and for CA-170, for which we are currently conducting a Phase 1 study in patients with advanced solid tumors and lymphomas; and CA-4948, forwhich, in January 2018 we initiated a Phase 1 trial in patients with advanced non-Hodgkin lymphomas, including those with MYD88 alterations.Our pipeline also includes CA-327, which is a pre-IND stage oncology drug candidate. We expect to file an IND application with the United StatesFood and Drug Administration, or FDA, for clinical testing of CA-327 in 2018. In March 2018, we exercised our option to license a fourth program, which isan immuno-oncology program, from our collaboration partner Aurigene.Further, we are party to a collaboration with F. Hoffmann-La Roche Ltd, or Roche, and Genentech Inc., or Genentech, a member of the Roche Group,under which Roche and Genentech are commercializing Erivedge, a first-in-class orally-administered small molecule Hedgehog signaling pathway inhibitor.Erivedge® (vismodegib) is approved for the treatment of advanced basal cell carcinoma, or BCC.Finally, we are also party to a collaboration agreement focused on immuno-oncology and selected precision oncology targets with Aurigene DiscoveryTechnologies Limited, or Aurigene, a specialized, discovery-stage biotechnology company and wholly-owned subsidiary of Dr. Reddy’s Laboratories. As ofDecember 31, 2017, we have licensed three programs under the Aurigene collaboration and we licensed the fourth program in March 2018.Based on our clinical development plans for our pipeline, we intend to predominantly focus our available resources on the continued development ofCUDC-907, as well as CA-170, CA-4948 and CA-327 in collaboration with Aurigene in the near term.Recent Developments69Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOn December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act ("Tax Reform Act"). The legislation significantlychanges U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax systems and imposing a repatriation tax ondeemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% toa flat 21% rate, effective January 1, 2018. The SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP insituations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail tocomplete the accounting for certain income tax effects of the Tax Reform Act. We have recognized the provisional tax impacts related to the revaluation ofthe deferred tax assets and liabilities and included these amounts in our consolidated financial statements for the year ended December 31, 2017. Theultimate impact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions wehave made, additional regulatory guidance that may be issued, and actions we may take as a result of the Tax Reform Act. The accounting is expected to becomplete when the 2017 U.S. corporate income tax return is filed in 2018.Our Collaborations and License AgreementsOur current collaborations and license agreements are summarized as follows:AurigeneIn January 2015, we entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of smallmolecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigene granted us anoption to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certainof such compounds including the development candidate and products containing such compounds, anywhere in the world, except for India and Russia,which are territories retained by Aurigene.In connection with the collaboration agreement, we issued to Aurigene 17,120,131 shares of our common stock, valued at $24.3 million at the time ofissuance, in partial consideration for the rights granted to us under the collaboration agreement, which we recognized as expense during the year endedDecember 31, 2015. The shares were issued pursuant to a stock purchase agreement with Aurigene dated January 18, 2015.In September 2016, we and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, in exchange forthe issuance by us to Aurigene of 10,208,333 shares of our common stock, Aurigene waived $24.5 million in potential milestones and other paymentsassociated with the first four programs in the collaboration that may have become due from us under the collaboration agreement. To the extent any of thesewaived milestones or other payments are not payable by us, e.g. in the event one or more of the milestone events do not occur, we will have the right todeduct the unused waived amount from any one or more of the milestone payment obligations tied to achievement of commercial milestone events. Theamendment also provides that, in the event supplemental program activities are performed by Aurigene, we will provide up to $2.0 million of additionalfunding for each of the third and fourth licensed program. The shares were issued pursuant to a stock purchase agreement with Aurigene dated September 7,2016.As of December 31, 2017, we have exercised our option to license the following three programs under the collaboration:1.IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orallyavailable small molecule inhibitor of IRAK4.2.PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. Thedevelopment candidate is CA-170, an orally available small molecule antagonist of PDL1 and VISTA.3.PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. Thedevelopment candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.In March 2018, we exercised the option to license a fourth program, which is an immuno-oncology program. For each option to license we exercise, weare obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the UnitedStates, specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligationsunder the development plan for such licensed program in an expeditious manner.Subject to specified exceptions, we and Aurigene agreed to collaborate exclusively with each other on the discovery, research, development andcommercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of thecollaboration agreement. At our option, and subject to specified70Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsconditions, we may extend such exclusivity for up to three additional one-year periods by paying to Aurigene additional exclusivity option fees on anannual basis. We exercised the first one-year exclusivity option in 2017. The fee for this exclusivity option exercise was $7.5 million, which we paid in twoequal installments in 2017. We have elected not to further exercise our exclusivity option and thus will not make the $10.0 million payment required for thisadditional exclusivity in 2018. As a result of our election to not further exercise our exclusivity option, we are no longer operating under the broad immuno-oncology exclusivity with Aurigene. We have, however, as provided in the agreement, elected to exercise our option to extend exclusivity on a program-by-program, year-by-year, basis for the IRAK4 Program and the PD1/VISTA Program, both of the licensed programs currently in clinical trials.Since January 2015, we have paid $14.5 million in research payments, option exercise fees and milestone payments to Aurigene, and have waived$15.5 million in milestones as part of the 2016 amendment.For each of the IRAK4, PD1/VISTA,PD1/TIM3 programs, and the fourth program, we have remaining unpaid or unwaived payment obligations of $42.5million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additionalindications, if any.We have agreed to pay Aurigene tiered royalties on our and our affiliates’ annual net sales of products at percentage rates ranging from the high singledigits up to 10%, subject to specified reductions.We have agreed to make certain payments to Aurigene upon our entry into sublicense agreements on any program(s), including:•with respect to amounts that we and our affiliates receive from sublicensees under a licensed program in the U.S. or the European Union, adeclining percentage of non-royalty sublicense revenues that is dependent on the stage of the most advanced product for such licensed programat the time the sublicense is granted, including, for example 25% of such amounts following our initiation of a Phase 2 clinical study and 15%of such amounts after initiation of the first pivotal study. This sharing will also extend to royalties that we receive from sublicensees, subject tominimum royalty percentage rates that we are obligated to pay to Aurigene, which generally range from mid-to-high single-digit royaltypercentage rates up to 10%;•with respect to sublicensing revenues we and our affiliates receive from sublicensees under a licensed program in Asia, 50% of suchsublicensing revenues, including both non-royalty sublicensee revenues and royalties that we receive from sublicensees; and•with respect to non-royalty sublicensing revenues we and our affiliates receive from sublicensees under a licensed program outside of the U.S.,the European Union and Asia, a percentage of such non-royalty sublicense revenues ranging from 30% to 50%. We are also obligated to share50% of royalties that we receive from sublicensees that we receive in these territories.Our royalty payment obligations (including those on sales by sublicensees) under the collaboration agreement with respect to a product in a countrywill expire on a product-by-product and country-by-country basis on the later of: (i) expiration of the last-to-expire valid claim of the Aurigene patentscovering the manufacture, use or sale of such product in such country; and (ii) 10 years from the first commercial sale of such product in such country.For additional information regarding the terms and termination provisions of this agreement, see “Business—Collaborations and License Agreements—Aurigene Agreement.”Genentech Hedgehog Signaling Pathway Collaboration AgreementCollaboration Overview. In 2003, we entered into a collaborative research, development and license agreement with Genentech, which we refer to asthe collaboration agreement. Under the terms of our collaboration agreement with Genentech, we granted Genentech an exclusive, global, royalty-bearinglicense, with the right to sublicense, to make, use, sell and import molecules capable of inhibiting the Hedgehog signaling pathway (including smallmolecules, proteins and antibodies) for human therapeutic applications, including cancer therapy. Genentech subsequently granted a sublicense to Roche fornon-U.S. rights to Erivedge, other than in Japan where such rights are held by Chugai. Genentech and Roche are responsible for worldwide clinicaldevelopment, regulatory affairs, manufacturing and supply, formulation, and sales and marketing.We are eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connectionwith the development of Erivedge or another small molecule hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche ofspecified clinical development and regulatory objectives. Of this amount, we have received $59.0 million to date. In addition to the contingent cashmilestone payments, our wholly-owned subsidiary, Curis Royalty, is entitled to a royalty on net sales of Erivedge. Pursuant to the terms of our collaborationagreement,71Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCuris Royalty is entitled to receive royalties on net sales of Erivedge that range from 5% to 7.5% based upon global Erivedge sales by Roche and Genentech.The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances, including when acompeting product that binds to the same molecular target as Erivedge is approved by the applicable country’s regulatory authority and is being sold in suchcountry by a third party for use in the same indication as Erivedge, or, when there is no issued intellectual property covering Erivedge in a territory in whichsales are recorded. During the third quarter of 2015, the FDA and CHMP approved another Hedgehog signaling pathway inhibitor, Odomzo® (sonidegib),which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advanced BCC. Accordingly, Genentech reduced royalties to Curis Royalty on itsnet sales in the United States of Erivedge by 2% since the fourth quarter of 2015. We recognized $9.8 million of royalty revenue from Genentech’s net salesof Erivedge during the year ended December 31, 2017, and have recognized an aggregate of $37.9 million in royalty revenues since Erivedge was approved.In connection with a $30.0 million loan made to our wholly-owned subsidiary, Curis Royalty, by BioPharma-II in 2012, we transferred to Curis Royaltyour right to receive certain royalty and royalty-related payments on the commercial sales of Erivedge that we receive from Genentech, and any payment madeby Genentech to us pursuant to Genentech’s indemnification obligations under the collaboration agreement. The loan and accrued interest was being repaidby Curis Royalty using such royalty and royalty-related payments. The loan constituted an obligation of Curis Royalty, and was non-recourse to Curis.In March 2017, we and Curis Royalty entered into a new credit agreement with HealthCare Royalty, for the purpose of refinancing the loan fromBioPharma-II. Accordingly, HealthCare Royalty made a $45.0 million loan at an interest rate of 9.95% to Curis Royalty, which was used in part to pay off$18.4 million in remaining loan obligations to Biopharma-II under the prior loan with the residual proceeds of $26.6 million distributed to the us as soleequity member of Curis Royalty. As of December 31, 2017, Curis Royalty owed HealthCare Royalty a total of $41.9 million, which was comprised ofprincipal and accrued interest. Curis Royalty has granted a first priority lien and security interest (excluding certain payments allocable to academicinstitutions) in all of its assets and all real, intangible, and personal property, including all of its right, title, and interest in and to the Erivedge royaltypayments, which are servicing the outstanding debt and accrued interest to HealthCare Royalty, and will continue to do so until the debt is fully repaid. Theloan constitutes an obligation of Curis Royalty, and is intended to be non-recourse to Curis, except that under certain circumstances arising from the breachof certain covenants and representations, HealthCare Royalty may proceed directly against Curis. Because the repayment of the term loan is contingent uponthe level of Erivedge royalties received, the short- and long-term classification of the debt is based on our estimate of the timing of amounts to be repaid.Accordingly, our estimate may not be indicative of when this loan would actually be repaid. The repayment term may be shortened or extended dependingon the actual level of Erivedge royalties received. In addition, if Erivedge royalties are insufficient to pay the accrued interest on the outstanding loan, anyunpaid interest will be added to the principal on a quarterly basis. The length of the actual repayment period could vary materially to the extent that royaltypayments Curis Royalty receives are lower than our current estimates, which could arise due to factors beyond our control, such as: the sale of competingproducts that result in a lowering of the royalty rates that Curis Royalty is entitled to receive, decreased market acceptance, or failure by Genentech and/orRoche to successfully commercialize Erivedge in territories where it has received regulatory approval.As a result of our licensing agreements with various universities, we are obligated to make payments to university licensors on royalties that CurisRoyalty earns in all territories (other than Australia) in an amount that is equal to 5% of the royalty payments received from Genentech. This obligationendures for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012. For royalties that we earn from Roche’s sales ofErivedge in Australia, we will be obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia until the expiration of theAustralian patent in April 2019, after which time the amount will decrease to 5% of the royalty payments that Curis Royalty receives from Genentech for theremainder of the period ending 10 years from the first commercial sale of Erivedge, or February 2022. Cost of royalty revenues were $0.5 million during theyear ended December 31, 2017. As of December 31, 2017, we have paid an aggregate of $2.0 million to university licensors since Erivedge was approved.The Leukemia & Lymphoma SocietyIn November 2011, we entered into an agreement with LLS, pursuant to which LLS agreed to provide us with up to $4.0 million in payments to supportour ongoing development of CUDC-907, subject to the achievement of specified milestones.In August 2015, we entered into an amendment of the November 2011 agreement with LLS. Under the amendment, LLS agreed to provide advisoryservices regarding both the CUDC-907 and IRAK4 programs, and LLS is no longer obligated to make further milestone payments related to ongoing clinicaldevelopment of CUDC-907.We agreed to make up to $1.7 million in future payments to LLS, which represents the aggregate payments previously received from LLS under theNovember 2011 agreement, pursuant to achievement of certain objectives, including a licensing,72Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentssale, or other similar transaction, as well as regulatory and commercial objectives, in each case related to the CUDC-907 program in hematologicalmalignancies. However, if CUDC-907 does not continue to meet its clinical safety endpoints in future clinical trials in the defined field, or fails to obtainnecessary regulatory approvals, all funding provided to us by LLS will be considered a non-refundable grant.LiquiditySince our inception, we have funded our operations primarily through private and public placements of our equity securities, license fees, contingentcash payments, research and development funding from our corporate collaborators, debt financings and the monetization of certain royalty rights. We havenever been profitable on an annual basis, and have an accumulated deficit of $952.3 million as of December 31, 2017.We will need to generate significant revenues to achieve profitability, and do not expect to achieve profitability in the foreseeable future, if at all. Weanticipate that our existing cash, cash equivalents and investments at December 31, 2017 should enable us to maintain our planned operations into thesecond half of 2019. For a further discussion of our liquidity and funding requirements, see “Liquidity and Capital Resources - Funding Requirements.”Key DriversWe 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 CUDC-907, CA-170 and CA-4948 as well as for suchclinical trials to generate favorable data;•our and Aurigene’s ability to complete preclinical development and IND-enabling studies for CA-327, and for us to then finance and completeplanned Phase 1 clinical trials for this development candidate;•Aurigene’s ability to advance additional preclinical immuno-oncology, and precision oncology drug candidates, and our ability to license theseprograms from Aurigene and further progress them clinically; and•Genentech and Roche’s ability to continue to successfully commercialize Erivedge in advanced BCC in the United States and in other globalterritories.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 successfullydevelop and commercialize additional drug candidates.Financial Operations OverviewGeneral. Our future operating results will largely depend on the progress of drug candidates currently in our research and development pipeline. Theresults 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 anypreclinical development or clinical trials then being conducted. For a discussion of our liquidity and funding requirements, see “Liquidity and CapitalResources - Funding Requirements.”Debt. In December 2012, our wholly-owned subsidiary, Curis Royalty LLC, or Curis Royalty, entered into a $30 million debt transaction withBioPharma-II, a Luxembourg limited liability company managed by Pharmakon Advisors, at an annual interest rate of 12.25% collateralized with certainfuture Erivedge royalty and royalty-related payment streams.In connection with the loan, we transferred to Curis Royalty our right to receive certain royalty and royalty-related payments from Genentech. The loanand accrued interest was an obligation of Curis Royalty, with no recourse to us, to be repaid using the royalty and royalty-related payments from Genentech.To secure repayment of the loan, Curis Royalty granted a first priority lien and security interest (subject only to permitted liens) to BioPharma-II in all of itsassets and all real, intangible and personal property, including all of its right, title and interest in and to the royalty and royalty-related payments. Under theterms of the loan, quarterly royalty payments received by Curis Royalty from Genentech were first applied to pay: (i) escrow fees payable by us pursuant to anescrow agreement between us, Curis Royalty, BioPharma-II and Boston Private Bank and Trust Company, (ii) our royalty obligations to university licensors,(iii) certain expenses incurred by BioPharma-II in connection with the credit agreement and related transaction documents, including enforcement of itsrights in the case of an event of default under the credit agreement and (iv) expenses incurred by us enforcing our right to indemnification under thecollaboration agreement with Genentech. Subsequent remaining amounts were applied first, to pay interest and second, principal on the loan. We remainedentitled to receive any contingent payments upon achievement of clinical development objectives. There were no caps to the amounts Curis Royalty wouldbe required to make to BioPharma-II. Curis Royalty retained the right to royalty payments related to sales of Erivedge following repayment of the loan.In March 2017, we and Curis Royalty LLC, or Curis Royalty, entered into a new credit agreement, referred to herein as the credit agreement, withHealthCare Royalty Partners III, L.P., or HealthCare Royalty, a Delaware limited partnership73Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsmanaged by Healthcare Royalty Management, LLC, for the purpose of refinancing the prior loan from BioPharma-II. On the effective date of the creditagreement with Healthcare Royalty, the prior loan was terminated in its entirety.HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% to Curis Royalty, which was used to pay off the approximate $18.4million in remaining loan obligations to Biopharma-II under the prior loan. The remaining proceeds of the loan of $26.6 million were distributed to us as soleequity holder of Curis Royalty.The loan from HealthCare Royalty will be repaid from certain royalty and royalty-related payments owed by Genentech under the Genentechcollaboration agreement, the rights to which were transferred from Curis to Curis Royalty pursuant to a purchase and sale agreement in 2012, in connectionwith the prior loan. Under the terms of the credit agreement, quarterly royalty and royalty-related payments from Genentech will first be applied to pay:(i) escrow fees payable by us pursuant to an escrow agreement, (ii) our royalty obligations to academic institutions, (iii) certain expenses incurred byHealthCare Royalty in connection with the credit agreement and related transaction documents, including enforcement of its rights in the case of an event ofdefault under the credit agreement, and (iv) expenses incurred by us enforcing our right to indemnification under the collaboration agreement. Subsequently,remaining amounts will be applied first, to pay interest and second, to pay principal on the loan. If Erivedge royalties are insufficient to pay the accruedinterest on the outstanding loan, the unpaid interest outstanding will be added to the loan principal on a quarterly basis.The final maturity date of the loan will be the earlier of such date as the principal is paid in full, or Curis Royalty’s rights to receive royalties under thecollaboration agreement with Genentech terminate. At any time before the third anniversary of the closing date, Curis Royalty may, subject to certainlimitations, prepay the outstanding principal of the loan in whole or in part, at a prepayment premium equal to the amount of interest that would haveaccrued from the date of prepayment through and including the third anniversary of the closing date. Thereafter, any voluntary prepayments during thefollowing periods are to be made at the following prepayment prices (calculated as a percentage of the principal amount prepaid):•105%, after the third anniversary of the closing date through and including the fourth anniversary of the closing date;•102.5%, after the fourth anniversary of the closing date through and including the fifth anniversary of the closing date;•101%, after the fifth anniversary of the closing date through and including the sixth anniversary of the closing date; and•100%, after the sixth anniversary of the closing date.The obligations of Curis Royalty under the credit agreement to repay the loan may be accelerated upon the occurrence of an event of default as definedin the credit agreement. As of December 31, 2017, the outstanding principal and interest due under the loan is $41.9 million.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 datehave been derived from license fees, research and development payments, and other amounts that we have received from our strategic collaborators andlicensees, including royalty payments. Since the first quarter of 2012, we have recognized royalty revenues related to Genentech’s sales of Erivedge and weexpect 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 theU.S. However, we expect that all of such royalty revenues will be used by our wholly-owned subsidiary, Curis Royalty, to pay principal and interest under theloan that Curis Royalty received from HealthCare Royalty, until such time as the loan is fully repaid. We currently estimate that all Erivedge royalties will beapplied to the loan from HealthCare Royalty for the foreseeable future. The repayment period is highly uncertain and could vary materially to the extent thatroyalty payments received are higher or lower than our current estimates, which could arise due to factors beyond our control, such as the sale of competingproducts that result in a lowering of the royalty rates we are entitled to receive, decreased market acceptance, a failure by Genentech and/or Roche to obtainrequired regulatory approvals, and other factors described under “Part I, Item 1A—Risk Factors.”We could receive additional milestone payments from Genentech, provided that contractually-specified development and regulatory objectives aremet. Our only source of revenues and/or cash flows from operations for the foreseeable future will be royalty payments that are contingent upon the continuedcommercialization of Erivedge under this collaboration, and contingent cash payments for the achievement of clinical, development and regulatoryobjectives, if any, are met, under our existing collaboration with Genentech. Our receipt of additional payments under our existing collaboration withGenentech 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 asrevenues in our consolidated statements of operations and comprehensive loss. These costs currently consist of payments we are obligated to make touniversity licensors on royalties that Curis Royalty receives from Genentech74Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentson 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 aperiod of 10 years from the first commercial sale of Erivedge, which occurred in February 2012. In addition, for royalties that Curis Royalty receives fromRoche’s sales of Erivedge in Australia, we will be obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia untilexpiration of the patent in April 2019. After April 2019, the amount we are obligated to pay will decrease to 5% of the royalty payments that Curis Royaltyreceives from Genentech through February 2022.Research and Development. Research and development expense consists of costs incurred to develop our drug candidates. These expenses consistprimarily of: salaries and related expenses for personnel, including stock-based compensation expense, costs of conducting clinical trials, including amountspaid to clinical centers, clinical research organizations and consultants, among others, other outside service costs including costs of contract manufacturing,sublicense payments, the costs of supplies and reagents, consulting, and occupancy and depreciation charges. Research and development expenses alsoinclude certain payments that we make to Aurigene under our collaboration agreement, including, for example, option exercise fees and milestone payments.We expense research and development costs as incurred. We are currently incurring research and development costs under our Hedgehog signaling pathwayinhibitor collaboration with Genentech related to the maintenance of third-party licenses to certain background technologies. In addition, we record researchand development expense for payments that we are obligated to make to certain third-party university licensors upon our receipt of payments from Genentechrelated to the achievement of clinical development and regulatory objectives under our collaboration agreement.75Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe following graphic outlines the current status of our programs:Our programs are in early stages of clinical or preclinical development. Therefore, our ability and that of our collaborators and licensees to successfullycomplete preclinical studies and clinical trials of these drug candidates, as appropriate, and the timing of completion of such programs, is highly uncertain.There are numerous risks and uncertainties associated with developing drugs which may affect our and our collaborators’ future results, including:•the scope, quality of data, rate of progress and cost of clinical trials and other research and development activities undertaken by us or ourcollaborators;•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.We cannot reasonably estimate or know the nature, timing and estimated costs of the efforts necessary to complete the development of, or the period inwhich, material net cash inflows are expected to commence from any of our drug candidates. Any failure to complete the development of our drug candidatesin a timely manner could have a material adverse effect on our operations, financial position and liquidity.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 “Part I, Item 1A—Risk Factors.”General and Administrative. General and administrative expense consists primarily of salaries, stock-based compensation expense and other relatedcosts for personnel in executive, finance, accounting, business development, legal, information technology, corporate communications and human resourcefunctions. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal, patentand accounting services. Patent costs include certain patents covered under collaborations, a portion of which is reimbursed by collaborators and a portion ofwhich is borne by us.76Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCritical Accounting Policies and EstimatesThe preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires thatwe make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimatesand judgments include the carrying value of property and equipment and intangible assets, revenue recognition, the value of certain liabilities, debtclassification and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe to be appropriateunder the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readilyapparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.While our significant accounting policies are more fully described in our consolidated financial statements, we believe that the following accountingpolicies are critical to understanding the judgments and estimates we use in preparing our financial statements:Revenue RecognitionOur business strategy includes entering into strategic license and development agreements with biotechnology and pharmaceutical companies for thedevelopment and commercialization of our drug candidates. The terms of the agreements typically include non-refundable license fees, funding of researchand development, payments based upon achievement of clinical development milestones and royalties on product sales. We follow the provisions of theFinancial Accounting Standards Board, or FASB, Codification Topic 605, Revenue Recognition.License Fees and Multiple Element Arrangements. Non-refundable license fees are recognized as revenue when we have a contractual right to receivesuch payment, the contract price is fixed or determinable, the collection of the resulting receivable is reasonably assured and we have no further performanceobligations under the license agreement. Multiple element arrangements, such as license and development arrangements are analyzed to determine whetherthe deliverables, which often include a license and performance obligations such as research and steering committee services, can be separated or whetherthey must be accounted for as a single unit of accounting in accordance with U.S. generally accepted accounting principles, or GAAP. We recognize up-frontlicense payments as revenue upon delivery of the license only if the license has stand-alone value. If the license is considered to not have stand-alone value,the arrangement would then be accounted for as a single unit of accounting and the license payments and payments for performance obligations arerecognized as revenue over the estimated period of when the performance obligations are performed.Whenever we determine that an arrangement should be accounted for as a single unit of accounting, we must determine the period over which theperformance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a relative performance or straight-linemethod. We recognize revenue using the relative performance method provided that we can reasonably estimate the level of effort required to complete ourperformance obligations under an arrangement and such performance obligations are provided on a best-efforts basis. Direct labor hours or full-timeequivalents are typically used as the measure of performance. Revenue recognized under the relative performance method would be determined bymultiplying the total payments under the contract, excluding royalties and payments contingent upon achievement of substantive milestones, by the ratio oflevel of effort incurred to date to estimated total level of effort required to complete our performance obligations under the arrangement. Revenue is limitedto the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, as determined using the relative performancemethod, as of each reporting period.If we cannot reasonably estimate the level of effort required to complete our performance obligations under an arrangement, the performanceobligations are provided on a best-efforts basis and we can reasonably estimate when the performance obligation ceases or becomes inconsequential, then thetotal payments under the arrangement, excluding royalties and payments contingent upon achievement of substantive milestones, would be recognized asrevenue on a straight-line basis over the period we expect to complete our performance obligations. Revenue is limited to the lesser of the cumulative amountof payments received or the cumulative amount of revenue earned, as determined using the straight-line basis, as of the period ending date.If we cannot reasonably estimate when our performance obligation either ceases or becomes inconsequential and perfunctory, then revenue is deferreduntil we can reasonably estimate when the performance obligation ceases or becomes inconsequential and perfunctory. Revenue is then recognized over theremaining estimated period of performance.In addition, if we are involved in a steering committee as part of a multiple element arrangement, we assess whether our involvement constitutes aperformance obligation or a right to participate. Steering committee services that are not inconsequential or perfunctory and that are determined to beperformance obligations are combined with other research77Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsservices or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period overwhich we expect to complete our aggregate performance obligations.Substantive Milestone Payments. Our collaboration agreements may also contain substantive milestone payments. Collaboration agreements thatcontain substantive milestone payments are recognized upon achievement of the milestone only if:•such milestone is commensurate with either of the following:a)our performance to achieve the milestone (for example, the achievement of the milestone involves a degree of risk and was not reasonablyassured at the inception of the arrangement); orb)the enhancement of the value of the deliverable as a result of a specific outcome resulting from our performance to achieve the milestone (orsubstantive effort on our part is involved in achieving the milestone);•such milestone relates solely to past performance; and•the amount of the milestone payment is reasonable relative to all deliverables and payment terms in the arrangement.Determination as to whether a payment meets the aforementioned conditions involves management’s judgment. If any of these conditions are not met,the resulting payment would not be considered a substantive milestone, and the resulting payment would be considered part of the consideration for thesingle unit of accounting and be recognized as revenue as such performance obligations are performed under either the relative performance or straight-linemethods, as applicable, and in accordance with these policies as described above. In addition, the determination that one such payment was not a substantivemilestone could prevent us from concluding that subsequent milestone payments were substantive milestones and, as a result, any additional milestonepayments could also be considered part of the consideration for the single unit of accounting and would be recognized as revenue as such performanceobligations are performed under either the relative performance or straight-line methods, as applicable. Milestones that are tied to regulatory approval are notconsidered probable of being achieved until such approval is received. Milestones tied to counterparty performance are not included in our revenue modeluntil the performance conditions are met.Reimbursement of Costs. Reimbursement of research and development costs by third party collaborators is recognized as revenue provided theprovisions of the FASB Codification Topic 605-45, Revenue Recognition, Principal Agent Consideration, are met, the amounts are determinable, andcollection of the related receivable is reasonably assured.Royalty Revenue. Since the first quarter of 2012, we have recognized royalty revenues related to Genentech’s sales of Erivedge in the U.S. and in othermarkets where Genentech and Roche successfully obtained marketing approval. However, Erivedge royalties we earn will service Curis Royalty’s debt toHealthCare Royalty.Royalty revenue is recognized upon the sale of the related products based on contractual terms, provided that the royalty amounts are fixed ordeterminable, collection of the related receivable is reasonably assured and we have no remaining performance obligations under the arrangement. If royaltiesare received when we have remaining performance obligations, we expect to attribute the royalty payments to the services being provided under thearrangement and therefore recognize such royalty payments as such performance obligations are performed under either the relative performance or straightline methods, as applicable, and in accordance with these policies as described above.Deferred Revenue. Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue in the accompanyingconsolidated balance sheets. Significant judgments are required in the application of revenue recognition guidance. Short-term deferred revenue wouldconsist of amounts that are expected to be recognized as revenue, or applied against future co-development costs, within the next fiscal year. Amounts thatwe expect will not be recognized in the next fiscal year would be classified as long-term deferred revenue. However, this estimate would be based on ouroperating plan as of the balance sheet date and on our estimated performance periods under the collaboration in which we have recorded deferred revenues. Ifour operating plan or our estimated performance period would change, we could recognize a different amount of deferred revenue over the reporting period.With respect to each of the foregoing areas of revenue recognition, we exercise significant judgment in determining whether an arrangement containsmultiple elements, and, if so, how much revenue is allocable to each element. In addition, we exercise our judgment in determining when our significantobligations have been met under such agreements and the specific time periods over which we recognized revenue, such as non-refundable, up-front licensefees. To the extent that actual facts and circumstances differ from our initial judgments, our revenue recognition with respect to such transactions wouldchange accordingly and any such change could affect our reported financial results.Stock-based Compensation78Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsWe account for stock-based compensation transactions using a grant-date fair-value-based method under FASB Codification Topic 718, Compensation—Stock Compensation.We have recorded employee and director stock-based compensation expense of $5.4 million, $4.3 million and $3.6 million for the years endedDecember 31, 2017, 2016 and 2015, respectively. We estimate that our stock-based compensation expense will increase in 2018 as we have granted, andexpect that we may continue to grant options, in 2018 that could increase the amount of stock-based compensation ultimately recognized. The amount of theincremental employee stock-based compensation expense attributable to 2018 employee stock options to be granted will depend primarily on the number ofstock options granted, the fair market value of our common stock at the respective grant dates, and the specific terms of the stock options.We measure compensation cost for share-based compensation at fair value, including estimated forfeitures, and recognize the expense as compensationexpense over the period that the recipient is required to provide service in exchange for the award, which generally is the vesting period. We use the Black-Scholes option pricing model to measure the fair value of stock options. This model requires significant estimates related to the award’s expected life andfuture stock price volatility of the underlying equity security. In determining the amount of expense to be recorded, we also elect to estimate forfeiture ratesfor awards, based on the probability that employees will complete the required service period. We estimate the forfeiture rate based on historical experience.If actual forfeitures differ significantly from our estimates, additional adjustments to compensation expense may be required in future periods. Ultimately, theactual expense recognized over the vesting period will only be for those shares that vest.Fair Value MeasurementsWe have adopted the provisions of the FASB Codification Topic 820, Fair Value Measurements and Disclosures. Topic 820 provides a framework formeasuring fair value under GAAP and requires expanded disclosures regarding fair value measurements. GAAP defines fair value as the exchange price thatwould be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderlytransaction between market participants on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent,(ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.GAAP requires the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The marketapproach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The incomeapproach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The costapproach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques shouldbe consistently applied. GAAP also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs, where available, andminimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1Quoted prices in active markets for identical assets or liabilities.Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are notactive; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets orliabilities.Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.Our cash equivalents and short- and long-term investments have been classified as either Level 1 or Level 2 assets. We do not hold any asset-backed orauction rate securities. Short-term accounts receivable and accounts payable are reflected in the consolidated financial statements at net realizable value,which approximates fair value due to the short-term nature of these instruments.While we believe our valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies orassumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date.79Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsLong-lived AssetsLong-lived assets consist primarily of property and equipment and goodwill. Property and equipment is stated at cost and depreciated over theestimated useful lives of the related assets using the straight-line method. Determining the economic lives of property and equipment requires us to makesignificant judgments that can materially impact our operating results. If it were determined that the carrying value of our other long-lived assets might not berecoverable based upon the existence of one or more indicators of impairment, we would measure an impairment based on application of the FASBCodification Topic 360-10-05, Impairment or Disposal of Long-Lived Assets.Debt issuance costs are stated at cost and amortized over the estimated term of the debt using the straight-line method. Assumptions used indetermining the term of the debt requires us to make significant judgments that would impact our operating results; however, we do not believe adjustmentsto the term of the debt and related amortization period would have a material impact on our financial statements.We evaluate our goodwill for impairment at least annually or more frequently if an indicator of potential impairment exists. In performing ourevaluations of impairment, we determine fair value using widely accepted valuation techniques, including discounted cash flows. These calculations containuncertainties as they require us to make assumptions related to future cash flows, projected useful lives of assets and the appropriate discount rate to reflectthe risk inherent in future cash flows. We must also make assumptions regarding industry economic factors and the profitability of future business strategies.If actual results are not consistent with our estimates and assumptions used in estimating future cash flows and asset fair values, we may be exposed to amaterial impairment charge. As a single reporting unit, we completed our annual goodwill impairment tests in December 2017, 2016 and 2015, anddetermined that as of those dates our fair value exceeded the carrying value of our net assets. Accordingly, no goodwill impairment was recognized in 2017,2016 and 2015.Debt ClassificationIn December 2012, our wholly-owned subsidiary, Curis Royalty, received a $30.0 million loan at an annual interest rate of 12.25% pursuant to a creditagreement between Curis Royalty and BioPharma-II. In connection with the loan, we transferred to Curis Royalty our right to receive certain future royaltyand royalty-related payments on the commercial sales of Erivedge that we received from Genentech. The loan and accrued interest was being repaid by CurisRoyalty using such royalty and royalty-related payments. In March 2017, we and Curis Royalty entered into a new credit agreement with HealthCare RoyaltyPartners III, L.P., or HealthCare Royalty, for the purpose of refinancing the loan from BioPharma-II. Accordingly, HealthCare Royalty made a $45.0 millionloan at an annual interest rate of 9.95% to Curis Royalty, which was used in part to pay off $18.4 million in remaining loan obligations to Biopharma-IIunder the prior loan with the residual proceeds of $26.6 million distributed to the us as sole equity member of Curis Royalty.The final maturity date of the HealthCare Royalty loan will be the earlier of such date as the principal is paid in full, or Curis Royalty’s rights to receiveroyalties under the collaboration agreement with Genentech terminate. At any time before the third anniversary of the closing date, Curis Royalty may,subject to certain limitations, prepay the outstanding principal of the loan in whole or in part, at a prepayment premium equal to the amount of interest thatwould have accrued from the date of prepayment through and including the third anniversary of the closing date. Thereafter, any voluntary prepaymentsduring the following periods are to be made at the following prepayment prices (calculated as a percentage of the principal amount prepaid):•105%, after the third anniversary of the closing date through and including the fourth anniversary of the closing date;•102.5%, after the fourth anniversary of the closing date through and including the fifth anniversary of the closing date;•101%, after the fifth anniversary of the closing date through and including the sixth anniversary of the closing date; and•100%, after the sixth anniversary of the closing date.Because the repayment of the term loan is contingent upon the level of Erivedge royalties received, the short- and long-term debt classification is basedon our best estimate of the timing of amounts to be repaid. The repayment term may be shortened or extended depending on the actual level of Erivedgeroyalties. In addition, if Erivedge royalties are insufficient to pay the accrued interest on the outstanding loan, the unpaid interest outstanding will be addedto the principal on a quarterly basis. We currently estimate that the loan will be repaid in 2023. However, the actual repayment period could vary materiallyfrom our estimate to the extent that royalty payments Curis Royalty receives are lower than our current estimates, which could arise due to factors beyond ourcontrol, such as competitive factors, decreased market acceptance or a failure by Genentech and/or Roche to successfully commercialize Erivedge interritories where it has received regulatory approval. For example, pursuant to the terms of our collaboration agreement, Curis Royalty is entitled to receiveroyalties on net sales of Erivedge that range from 5% to 7.5% based upon global Erivedge sales by Roche and Genentech, subject to reduction underspecified80Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscircumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by the applicable regulatory authorityand is being sold in such country by a third party for use in the same indication as Erivedge or when there is no issued intellectual property coveringErivedge in a territory in which sales are recorded. During 2015, the FDA and CHMP approved an additional Hedgehog signaling pathway inhibitorsonidegib, developed by Novartis for the treatment of adults with locally advanced BCC. Accordingly, Genentech has reduced royalties on its net sales in theUnited States of Erivedge by 2%.Our discussion of our critical accounting policies is not intended to be a comprehensive discussion of all of our accounting policies. In many cases, theaccounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’sjudgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materiallydifferent result.Results of Operations (all amounts rounded to the nearest thousand)Years Ended December 31, 2017, 2016 and 2015The following table summarizes our results of operations for the years ended December 31, 2017, 2016 and 2015: For the Year EndedDecember 31, Percentage Increase/ (Decrease) 2017 2016 2015 2017 v. 2016 2016 v. 2015 Revenues$9,898 $7,527 7,878 31 % (4)%Cost of royalty revenues496 399 406 24 % (2)%Research and development45,096 31,590 26,699 43 % 18 %In-process research and development— 17,989 24,348 (100)% (26)%General and administrative14,066 15,588 12,906 (10)% 21 %Total other expense, net3,557 2,372 2,500 50 % (5)%Net loss$(53,317) $(60,411) $(58,981) (12)% 2 %RevenuesTotal revenues are summarized as follows For the Year EndedDecember 31, Percentage Increase/ (Decrease) 2017 2016 2015 2017 v. 2016 2016 v. 2015REVENUES: Royalties9,849 7,810 8,031 26 % (3)%Research and development, net49 (283) (153) (117)% 85 %Total revenues$9,898 $7,527 $7,878 31 % (4)%Total revenues increased by $2.4 million, or 31%, to $9.9 million for the year ended December 31, 2017 as compared to $7.5 million for the year endedDecember 31, 2016, related to an increase in royalty revenues arising from Genentech and Roche’s net sales of Erivedge during the current year as comparedto the prior year period.Total revenues decreased by $0.4 million, or 4%, to $7.5 million for the year ended December 31, 2016 as compared to $7.9 million for the year endedDecember 31, 2015, related primarily to a decrease in royalty revenues arising from Genentech and Roche’s net sales of Erivedge during the current year ascompared to the prior year period.Cost of Royalty Revenues. Cost of royalty revenues increased by $0.1 million, to $0.5 million for the year ended December 31, 2017 as compared to$0.4 million for the year ended December 31, 2016. Cost of royalty revenues remained at $0.4 million for both the years ended December 31, 2016 and 2015.We are obligated to make payments to two university licensors on royalties that Curis Royalty earns on Genentech’s net sales of Erivedge.Research and Development Expenses. Research and development expenses are summarized as follows:81Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents For the Year EndedDecember 31, Percentage Increase/ (Decrease) 2017 2016 2015 2017 v. 2016 2016 v. 2015Direct research and development expenses$31,468 $20,740 $18,515 52% 12%Employee-related expenses11,752 9,035 6,437 30% 40%Facilities, depreciation and other expenses1,876 1,815 1,747 3% 4%Total research and development expenses$45,096 $31,590 $26,699 43% 18%Our total research and development expenses increased by $13.5 million, or 43%, to $45.1 million for the year ended December 31, 2017, as comparedto $31.6 million for the prior year. Direct research and development expenses increased $10.7 million for the year ended December 31, 2017 as compared tothe prior year period, which was primarily due to two payments to Aurigene for $3.8 million each, for an exclusivity option which were paid in January 2017and September 2017 as well as increased costs related to ongoing clinical activities for CA-170. These costs included increased clinical site, patient, clinicalresearch organization, formulation and manufacturing and consulting costs for our ongoing Phase 1 clinical trial. Employee-related expenses increased $2.7million for the year ended December 31, 2017 as compared to the prior year period, which was primarily due to higher stock-based compensation expenseand personnel costs.Our total research and development expenses increased by $4.9 million, or 18%, to $31.6 million for the year ended December 31, 2016, as comparedto $26.7 million for the year ended December 31, 2015. Direct research and development expenses increased $2.2 million for the year ended December 31,2016 as compared to the prior year period, which was primarily the result of increased costs related to clinical activities for CUDC-907, including increasedclinical site, patient, clinical research organization, formulation and manufacturing and consulting costs for our ongoing Phase 1 clinical trials, as well ascosts for our Phase 2 trial, which was initiated in January 2016. The increase also includes $6.0 million of milestone payments and costs paid in 2016.Employee-related expenses increased $2.6 million for the year ended December 31, 2016 as compared to the prior year period, which was primarily due toadditional headcount (a 35% increase from prior period).We expect that a majority of our research and development expenses for the foreseeable future will be incurred in connection with our efforts to advanceour programs, including clinical and preclinical development costs, option exercise fees, exclusivity option payments, and potential payments uponachievement of certain milestones.In-process Research and Development. For the year ended December 31, 2017, we did not recognize any in-process research and development expenses.We recorded in-process research and development expenses of $18.0 million for the year ended December 31, 2016, which represented the consideration wepaid as part of our amendment to the collaboration agreement with Aurigene. We also recorded in-process research and development expenses of $24.3million for the year ended December 31, 2015, which represents partial consideration for the rights granted to us in January 2015 under the collaborationagreement with Aurigene.General and Administrative Expenses. General and administrative expenses are summarized as follows: For the Year EndedDecember 31, Percentage Increase/ (Decrease) 2017 2016 2015 2017 v. 2016 2016 v. 2015Personnel$4,620 $4,374 3,707 6 % 18 %Occupancy and depreciation460 432 394 6 % 10 %Legal services2,055 2,969 2,196 (31)% 35 %Professional and consulting services1,835 2,859 2,300 (36)% 24 %Insurance costs404 392 366 3 % 7 %Other general and administrative expenses819 999 1,091 (18)% (8)%Stock-based compensation3,873 3,563 2,852 9 % 25 %Total general and administrative expenses$14,066 $15,588 $12,906 (10)% 21 %General and administrative expenses decreased by $1.5 million, or 10%, during the year ended December 31, 2017 as compared to the prior year. Thedecrease in general administrative expense was driven primarily by lower legal, professional and consulting services and other administrative expenses, offsetslightly by higher stock-based compensation for the period.General and administrative expenses increased by $2.7 million, or 21%, during the year ended December 31, 2016 as compared to the prior year. Theincrease in general administrative expense was driven primarily by higher personnel costs and stock-based compensation due to increased headcount (a 23%increase from prior period), an increase in legal service costs82Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsrelated to our intellectual property and an increase in professional and consulting services related to various corporate initiatives.Other Expense (Income). For the years ended December 31, 2017, 2016 and 2015, interest expense was $4.0 million, $2.8 million and $3.3 million,respectively. The increase in interest expense in the current year was related to a higher principal balance Curis Royalty’s outstanding debt with HealthCareRoyalty, which was refinanced in the first quarter of 2017. For the years ended December 31, 2017, 2016 and 2015, interest income was $0.5 million, $0.4million and $0.3 million, respectively.Net Loss Applicable to Common StockholdersAs a result of the foregoing, we incurred a net loss applicable to common stockholders of $53.3 million for the year ended December 31, 2017, $60.4million for the year ended December 31, 2016 and $59.0 million for the year ended December 31, 2015.Liquidity and Capital ResourcesWe have financed our operations primarily through private and public placements of our equity securities, license fees, contingent cash payments andresearch and development funding from our corporate collaborators, debt financings, and the monetization of certain royalty rights.Public Offering of Common StockOn September 18, 2017, we entered into an underwriting agreement with Baird as underwriter, under which we issued and sold 20,000,000 shares of ourcommon stock. The offering price to the public was $1.85 per share, and the underwriter agreed to purchase the shares from us pursuant to the underwritingagreement at a price of $1.78 per share. Under the terms of the underwriting agreement, we granted the underwriter an option, exercisable for 30 days, topurchase up to an additional 3,000,000 shares of common stock at the public offering price per share less the underwriting discounts and commissions. Theunderwriter's option was not exercised. We received net proceeds from the sale of the shares, after deducting the underwriting discounts and commissions andestimated offering expenses, of $35.3 million. We incurred offering expenses of $0.3 million related to this transaction.Placement of Equity SecuritiesOn July 2, 2015, we entered into a sales agreement with Cowen and Company, or Cowen, pursuant to which we may sell from time to time up to $30.0million of our common stock through an “at-the-market” equity offering program, under which Cowen will act as sales agent. Subject to the terms andconditions of the sales agreement, Cowen may sell the common stock by methods deemed to be an “at-the-market” offering as defined in Rule 415promulgated under the Securities Act of 1933, as amended, including sales made directly on the NASDAQ Global Market, on any other existing tradingmarket for the common stock, or to or through a market maker other than on an exchange. We are not obligated to sell any of the common stock under thissales agreement. Either Cowen or we may at any time suspend solicitations and offers under the sales agreement upon notice to the other party. The salesagreement may be terminated at any time by either party upon written notice to the other party, in the manner specified in the sales agreement. The aggregatecompensation payable to Cowen will be 3% of the gross sales price of the common stock sold pursuant to the sales agreement. The shares to be sold under thesales agreement, if any, may be sold and issued pursuant to the currently effective universal shelf registration statement on Form S-3, filed with the Securitiesand Exchange Commission on July 2, 2015. As of December 31, 2017, we have sold an aggregate of 2,103,981 shares of common stock pursuant to this salesagreement, for net proceeds of $6.2 million.Debt FinancingIn December 2012, our wholly-owned subsidiary, Curis Royalty, received a $30.0 million loan, at an annual interest rate of 12.25%, pursuant to a creditagreement with BioPharma-II. In connection with the loan, we transferred to Curis Royalty our right to receive certain future royalty and royalty-relatedpayments on the commercial sales of Erivedge that we may receive from Genentech. The loan and accrued interest was being repaid by Curis Royalty usingsuch royalty and royalty-related payments. The loan constituted an obligation of Curis Royalty, and was non-recourse to us. The final maturity date of theloan was the earlier of such date that the principal is paid in full, or Curis Royalty’s right to receive royalties under the collaboration agreement withGenentech is terminated.In March 2017, we and our wholly-owned subsidiary Curis Royalty, entered into a credit agreement with HealthCare Royalty for the purpose ofrefinancing our and Curis Royalty’s existing royalty financing arrangement with BioPharma-II. On the effective date of the credit agreement with HealthcareRoyalty, the prior loan was terminated in its entirety. Pursuant to the credit agreement, HealthCare Royalty made a $45.0 million loan at an annual interestrate of 9.95% to Curis Royalty, which83Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentswas used to pay off the $18.4 million in remaining loan obligations to Biopharma-II under the prior loan. The residual proceeds of the loan were distributedto us as sole equity member of Curis Royalty.Payments to BioPharma-II and HealthCare Royalty for the year ended December 31, 2017 totaled $8.9 million, of which $5.0 million has been appliedto the principal, and the remainder satisfying interest obligations. As of December 31, 2017, Curis Royalty owed a total of $41.9 million, gross of issuancecosts, to HealthCare Royalty, including accrued interest.Milestone Payments and Monetization of Royalty RightsWe have received aggregate milestone payments totaling $59.0 million under our collaboration with Genentech. In addition, we began receivingroyalty 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 royaltyrevenues received after December 2012 have been used to repay Curis Royalty’s outstanding principal and interest under the loans due to BioPharma-II andHealthCare Royalty, subject to specified quarterly caps. Erivedge royalty revenues will continue to be used to repay Curis Royalty’s outstanding principaland interest under the loan due to HealthCare Royalty. We also remain entitled to receive any contingent payments upon achievement of clinicaldevelopment objectives and royalty payments related to sales of Erivedge following repayment of the loan. Upon receipt of any such payments, as well as onroyalties received in any territory other than Australia, we are required to make payments to certain university licensors totaling 5% of these amounts. Inaddition, for royalties that Curis Royalty receives from Roche’s sales of Erivedge in Australia, we are obligated to make payments to university licensors of2% 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 will decreaseto 5% of the royalty payments that Curis Royalty receives from Genentech through February 2022.At December 31, 2017, our principal sources of liquidity consisted of cash, cash equivalents, and investments of $60.2 million, excluding our restrictedinvestments of $0.2 million. Our cash and cash equivalents are highly liquid investments with a maturity of three months or less at date of purchase, andconsist of investments in money market funds with commercial banks and financial institutions, as well as short-term commercial paper and governmentobligations. We maintain cash balances with financial institutions in excess of insured limits.Cash FlowsCash flows for operations have primarily been used for salaries and wages for our employees, facility and facility-related costs for our office andlaboratory, fees paid in connection with preclinical and clinical studies, laboratory supplies, consulting fees and legal fees. We expect that costs associatedwith clinical studies will increase in future periods.Net cash used in operating activities of $48.4 million during the year ended December 31, 2017 was primarily the result of our net loss for the period of$53.3 million, offset by non-cash charges consisting of stock-based compensation, non-cash interest expense, amortization of debt issuance costs, anddepreciation, totaling $5.7 million. Accounts payable and accrued liabilities decreased $0.4 million, accounts receivable increased $0.6 million related to anincrease in fourth quarter Erivedge royalties, and prepaid assets increased $0.3 million. Net cash used in operating activities of $35.8 million during the year ended December 31, 2016 was primarily the result of our net loss for the period of$60.4 million, offset by non-cash charges consisting of the stock issuance to Aurigene as partial consideration for the collaboration agreement with Aurigene,stock-based compensation, non-cash interest expense and depreciation totaling $22.7 million. Accounts payable and accrued liabilities increased $2.3million, accounts receivable increased $0.4 million related to an increase in Erivedge royalties and prepaid assets increased $0.1 million.Net cash used in operating activities was $29.9 million during the year ended December 31, 2015, primarily the result of our net loss for the period of$59.0 million, offset by non-cash charges consisting of the stock issuance to Aurigene as partial consideration for the collaboration agreement with Aurigene,stock-based compensation, changes in the fair value of our warrant liability, non-cash interest expense and depreciation which totaled $28.2 million.Accounts payable and accrued liabilities increased $1.8 million, which includes the accrual of $1.0 million in supplemental research and developmentfunding under our Aurigene collaboration and an increase in clinical accruals related to our ongoing trials. In addition, accounts receivable increased $0.1million related to an increase in Erivedge royalties and prepaid assets increased $0.7 million.We expect to continue to use cash in operations as we seek to advance our drug candidates and our existing programs under our collaborationagreement with Aurigene. In addition, in the future we may owe royalties and other contingent payments to our licensors based on the achievement ofdevelopmental milestones, product sales and other specified objectives.Investing activities used cash of $3.6 million, provided cash of $30.1 million and used cash of $6.4 million for the years ended December 31, 2017,2016 and 2015, respectively, resulting primarily from net investment activity from purchases and84Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentssales or maturities of investments for the respective periods. The higher purchases of investments during the years ended December 31, 2017 andDecember 31, 2015 resulted from the reinvestment of the net proceeds received from the public offering of our common stock.Financing activities provided cash of $64.2 million for the year ended December 31, 2017. We received $26.6 million in net proceeds from our loanwith HealthCare Royalty, $41.5 million in net proceeds from our underwritten public offering of common stock and at-the-market sales pursuant to our salesagreement with Cowen and $1.1 million from the exercise of stock options and purchases under our employee stock purchase plan during the same period.These proceeds were offset by the principal payments on Curis Royalty’s loan with BioPharma-II and HealthCare Royalty of $5.0 million.Financing activities used cash of $1.4 million for the year ended December 31, 2016 as a result of principal payments on Curis Royalty’s loan withBioPharma-II of $4.3 million. These payments were offset by $2.9 million of proceeds from the exercise of stock options and purchases under our employeestock purchase plan during the same period.Financing activities provided cash of $61.7 million for the year ended December 31, 2015. We received $64.6 million in net proceeds from ourunderwritten public offering of common stock, and we also received proceeds of $1.2 million from the exercise of stock options and purchases under ouremployee stock purchase plan during the same period. These proceeds were offset by the principal payments on Curis Royalty’s loan with BioPharma-II of$4.2 million.Funding RequirementsWe have incurred significant losses since our inception. As of December 31, 2017, we had an accumulated deficit of approximately $952.3 million. Wewill require substantial funds to continue our research and development programs and to fulfill our planned operating goals. In particular, our currentlyplanned operating and capital requirements include the need for working capital to support our research and development activities for CUDC-907, CA-170,CA-4948, CA-327 and other programs under our collaboration with Aurigene, and to fund our general and administrative costs and expenses. We anticipatethat our existing cash, cash equivalents and investments at December 31, 2017 should enable us to maintain our planned operations into the second half of2019. 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 willdepend on financial, economic and market conditions, many of which are outside of our control, and it may be unable to raise financing when needed, or onterms 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 any of our product candidates. Factors that may affect our planned future capital requirements and accelerate ourneed for additional working capital include 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;•the timing and amount of option exercise fees, milestone payments, royalties and other payments due to licensors, including Aurigene, for patentrights 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 ourresponsibility, 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 andtechnology license fees; and•unexpected losses in our cash investments or an inability to otherwise liquidate our cash investments due to unfavorable conditions in the capitalmarkets.Subject to specified exceptions, we and Aurigene agreed to collaborate exclusively with each other on the discovery, research, development andcommercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of thecollaboration agreement. At our option, and subject to specified conditions, we may extend such exclusivity for up to three additional one-year periods bypaying to Aurigene additional exclusivity option fees on an annual basis. We exercised the first one-year exclusivity option in 2017. The fee for thisexclusivity option exercise was $7.5 million, which we paid in two equal installments in 2017. We have elected not to further exercise our exclusivity optionand thus will not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of our election to not further exercise ourexclusivity option, we are no longer operating under the broad immuno-oncology exclusivity with Aurigene. We have, however, as provided in theagreement, elected to exercise our option to85Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsextend exclusivity on a program-by-program, year-by-year, basis for the IRAK4 Program and the PD1/VISTA Program both of the licensed programs currentlyin clinical trials.We have historically derived a portion of our operating cash flow from our receipt of milestone payments under collaboration agreements with thirdparties. However, we cannot predict whether we will receive additional milestone payments under existing or future collaborations.To become and remain profitable, we, either alone or with collaborators, must develop and eventually commercialize one or more drug candidates withsignificant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinicaltrials of our drug candidates, obtaining marketing approval for these drug candidates, manufacturing, marketing and selling those drugs for which we mayobtain marketing approval and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may never generaterevenues that are significant or large enough to achieve profitability. Other than Erivedge, which is being commercialized by Genentech and Roche, our mostadvanced 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 incursubstantial operating losses. Our failure to become and remain profitable would, among other things, depress the market price of our common stock and couldimpair our ability to raise capital, expand our business, diversify our research and development programs or continue our operations.Contractual ObligationsAs of December 31, 2017 we had contractual obligations and other commitments as follows: Payment Due By Period (amounts in 000’s) Total Less thanOne Year One toThree Years Three toFive Years More thanFive YearsDebt obligations under credit agreement (1)$56,390 $9,671 $20,673 $22,567 $3,479Operating lease obligations (2)2,104 935 1,169 — —Outside service obligations (3)969 636 333 — —Licensing obligations (4)347 300 47 — —Total future obligations$59,810 $11,542 $22,222 $22,567 $3,479 (1)As of December 31, 2017, the outstanding balance, including interest, on the debt was $41.9 million. The above amounts reflect management’sestimates as of December 31, 2017 of repayments, including accrued interest payments, based on the terms of Curis Royalty’s credit facility withHealthCare Royalty, and assumptions about potential future Erivedge royalties. If future royalties are lower or higher than these assumptions, therepayment period will increase or decrease, respectively, and related debt payments will fluctuate accordingly.(2)We are party to a lease agreement with the Trustees of Lexington Office Realty Trust pursuant to which we lease 24,529 square feet of property foroffice, research and laboratory space located at 4 Maguire Road in Lexington, Massachusetts. The term of the lease agreement commenced onDecember 1, 2010, and, pursuant to a second amendment to the lease agreement on November 1, 2017, it will expire on February 29, 2020. The totalremaining cash obligation for the base rent over the second amended term of the lease agreement is approximately $2.1 million. In addition to thebase rent, we are responsible for our share of operating expenses and real estate taxes, in accordance with the terms of the lease agreement. Amountsinclude contractual rent payments as defined in the agreement.(3)Outside service obligations consist of agreements we have with outside labs, consultants and various other service organizations. Obligations toclinical research organizations, medical centers and hospitals conducting our clinical trials are included in our financial statements for costs incurredas of December 31, 2017. Our obligations under these types of arrangements are limited to actual costs incurred for services performed and do notinclude any contingent or milestone payments.(4)Licensing obligations include only obligations that are known to us as of December 31, 2017. In the future, we may owe royalties and othercontingent payments to our licensors based on the achievement of developmental milestones, product sales, and other specified objectives. Thesefuture obligations, including those related to Aurigene, Genentech, Debiopharm and LLS, are not reflected in the table above as these payments arecontingent upon achievement of developmental and commercial milestones, the likelihood and timing of which cannot be reasonably estimated atthis time. These contingent obligations are further described under the “Our Collaborations and License Agreements” section.86Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOff-Balance Sheet ArrangementsWe have no off-balance sheet arrangements as of December 31, 2017.InflationWe believe that inflation has not had a significant impact on our revenue and results of operations since inception.New Accounting PronouncementsSee Note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this annual report onForm 10-K for a description of recent accounting pronouncements applicable to our business.ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKOur current cash balances in excess of operating requirements are invested in cash equivalents, short-term marketable securities, which consist of timedeposits and investments in money market funds with commercial banks and financial institutions, short-term commercial paper, and government obligationswith an average maturity of less than one year, and long-term investments. All marketable securities and long-term investments are considered available-for-sale. The primary objective of our cash investment activities is to preserve principal while at the same time maximizing the income we receive from ourinvested cash without significantly increasing risk of loss. This objective may be adversely affected by a sometimes-volatile business environment andcontinued unpredictable and unstable market conditions.Our marketable securities and long-term investments are subject to interest rate risk and will fall in value if market interest rates increase. While as ofthe date of this filing, we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents,marketable securities or long-term investments since December 31, 2017, no assurance can be given that further deterioration in conditions of the globalcredit and financial markets would not negatively impact our current portfolio of cash equivalents or marketable securities or our ability to meet ourfinancing objectives. Further dislocations in the credit market may adversely impact the value and/or liquidity of marketable securities and long-terminvestments owned by us. To help manage this risk, we limit our investments to investment grade securities and deposits are with investment grade financialinstitutions. We believe that the realization of losses due to changes in credit spreads is unlikely as we currently have the ability to hold our investments for asufficient period of time to recover the fair value of the investment and there is sufficient evidence to indicate that the fair value of the investment isrecoverable. We do not use derivative financial instruments in our investment portfolio. We do not believe that a 10% change in interest rate percentageswould have a material impact on the fair value of our investment portfolio or our interest income.ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAManagement’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or underthe supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to providereasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance withgenerally accepted accounting principles and includes those policies and procedures that:•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and ourboard of directors; and•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have amaterial effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of evaluations ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate.87Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsOur management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment ourmanagement used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of theTreadway Commission, or COSO.Based on our assessment, management concluded that, as of December 31, 2017, our internal control over financial reporting is effective based on thecriteria established in Internal Control—Integrated Framework (2013) issued by COSO.The effectiveness of our internal control over financial reporting as of December 31, 2017 has been audited by PricewaterhouseCoopers LLP, anindependent registered public accounting firm, who has issued an attestation report on our internal control over financial reporting that appears herein.88Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsReport of Independent Registered Public Accounting FirmTo the Board of Directors and Stockholders of Curis, Inc.Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of Curis, Inc. and its subsidiaries (the “Company”) as of December 31, 2017 and 2016, andthe related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period endedDecember 31, 2017, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company'sinternal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework (2013) issued bythe Committee of Sponsoring Organizations of the Treadway Commission (COSO).In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as ofDecember 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 inconformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all materialrespects, effective internal control over financial reporting as of December 31, 2017, based on criteria established in Internal Control - Integrated Framework(2013) issued by the COSO.Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, andfor its assessment of the effectiveness of internal control over financial reporting, included in Management’s Report on Internal Control over FinancialReporting appearing under Item 8. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company'sinternal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting OversightBoard (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonableassurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internalcontrol over financial reporting was maintained in all material respects.Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financialstatements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis,evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles usedand significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internalcontrol over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performingsuch other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.Emphasis of matterAs discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund planned future operations.Management’s plans in regard to this matter are described in Note 1.Definition and Limitations of Internal Control over Financial ReportingA company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the89Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscompany; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’sassets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate./s/ PricewaterhouseCoopers LLPBoston, MassachusettsMarch 8, 2018We have served as the Company's auditor since 2002.90Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCURIS, INC. AND SUBSIDIARIESConsolidated Balance Sheets(In thousands, except share and per share data) December 31, 2017 2016ASSETS Current Assets: Cash and cash equivalents$38,288 $26,038Investments21,944 18,447Accounts receivable3,073 2,459Prepaid expenses and other current assets989 1,257Total current assets64,294 48,201Property and equipment, net366 413Long-term investment—restricted153 153Goodwill8,982 8,982Other assets3 3Total assets$73,798 $57,752LIABILITIES AND STOCKHOLDERS’ EQUITY Current Liabilities: Accounts payable$5,423 $5,883Accrued liabilities2,793 2,725Current portion of long-term debt, net5,886 4,939Total current liabilities14,102 13,547Long-term debt, net35,669 14,921Other long-term liabilities34 18Total liabilities49,805 28,486Stockholders’ Equity: Common stock, $0.01 par value—225,000,000 shares authorized at December 31, 2017 and 2016,respectively; 165,379,967 shares issued and 164,157,121 shares outstanding at December 31, 2017,respectively; 142,346,871 shares issued and 141,124,025 shares outstanding at December 31, 20161,654 1,423Additional paid-in capital976,130 928,319Treasury stock (at cost, 1,222,846 shares at December 31, 2017 and 2016, respectively)(1,524) (1,524)Accumulated deficit(952,265) (898,948)Accumulated other comprehensive loss(2) (4)Total stockholders’ equity23,993 29,266Total liabilities and stockholders’ equity$73,798 $57,752The accompanying notes are an integral part of these consolidated financial statements.91Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCURIS, INC. AND SUBSIDIARIESConsolidated Statements of Operations and Comprehensive Loss(In thousands, except share and per share data) Years Ended December 31, 2017 2016 2015Revenues: Royalties$9,849 $7,810 $8,031Research and development, net49 (283) (153)Total revenues9,898 7,527 7,878Costs and Expenses: Cost of royalties496 399 406Research and development45,096 31,590 26,699In-process research and development— 17,989 24,348General and administrative14,066 15,588 12,906Total costs and expenses59,658 65,566 64,359Loss from operations(49,760) (58,039) (56,481)Other (Expense) Income: Interest income513 406 277Other (expense) income(104) (1) 548Interest expense(3,966) (2,777) (3,325)Total other expense, net(3,557) (2,372) (2,500)Net loss$(53,317) $(60,411) $(58,981)Net Loss per Common Share (Basic and Diluted)$(0.36) $(0.45) $(0.48)Weighted Average Common Shares (Basic and Diluted)149,133,466 132,785,687 123,365,195Net Loss$(53,317) $(60,411) $(58,981)Other comprehensive gain/(loss), net of tax: Unrealized gain/(loss) on marketable securities2 (32) 39Comprehensive loss$(53,315) $(60,443) $(58,942)The accompanying notes are an integral part of these consolidated financial statements.92Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCURIS, INC. AND SUBSIDIARIESConsolidated Statements of Stockholders’ Equity(In thousands, except share data) Common Stock AdditionalPaid-inCapital TreasuryStock AccumulatedDeficit AccumulatedOtherComprehensiveIncome/(Loss) TotalStockholders’Equity Shares Amount Balance, December 31, 201487,253,657 $873 $810,001 $(1,524) $(779,556) $(11) $29,783Issuances of common pursuant to sales of shares inthe Company’s public offering (see Note 11(b)),net of $4,381 in issuance costs25,090,908 251 64,369 — — — 64,620Issuance of common stock in consideration forrights granted under the Aurigene collaborationagreement (see Note 3(b))17,120,131 171 23,797 — — — 23,968Issuances of common stock upon the exercise ofstock options and for purchases under the ESPP748,528 7 1,199 — — — 1,206Recognition of employee stock-basedcompensation— — 3,582 — — — 3,582Non-employee stock-based compensation expense,including mark-to-market— — 293 — — — 293Other comprehensive loss— — — — — 39 39Net loss— — — — (58,981) — (58,981)December 31, 2015130,213,224 1,302 903,241 (1,524) (838,537) 28 64,510Issuance of common stock in consideration forrights granted under the Aurigene collaborationagreement (see Note 3(b))10,208,333 102 17,865 — — — 17,967Issuances of common stock upon the exercise ofstock options and for purchases under the ESPP1,925,314 19 2,888 — — — 2,907Recognition of employee stock-basedcompensation— — 4,294 — — — 4,294Non-employee stock-based compensation expense,including mark-to-market— — 31 — — — 31Other comprehensive loss— — — — — (32) (32)Net loss— — — — (60,411) — (60,411)December 31, 2016142,346,871 1,423 928,319 (1,524) (898,948) (4) 29,266Issuances of common pursuant to sales of shares inthe Company’s public offering, net of $0.3million of issuance costs20,000,000 200 35,131 — — — 35,331Issuances of common pursuant to sales of sharesfrom the Company’s ATM, net of $0.2 millionof commissions2,103,981 21 6,194 — — — 6,215Issuances of common stock upon the exercise ofstock options and for purchases under the ESPP953,501 10 1,169 — — — 1,179Exercise of stock options settled in shares(24,386) — (42) — — — (42)Recognition of employee stock-basedcompensation— — 5,365 — — — 5,365Non-employee stock-based compensation expense,including mark-to-market— — (6) — — — (6)Other comprehensive gain— — — — — 2 2Net loss— — — — (53,317) — (53,317)Balance, December 31, 2017165,379,967 $1,654 $976,130 $(1,524) $(952,265) $(2) $23,993The accompanying notes are an integral part of these consolidated financial statements.93Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsCURIS, INC. AND SUBSIDIARIESConsolidated Statements of Cash Flows(In thousands) Years Ended December 31, 2017 2016 2015Cash Flows from Operating Activities: Net loss$(53,317) $(60,411) $(58,981)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization235 193 161Stock-based compensation expense5,359 4,325 3,875Issuance of common stock in consideration for rights granted under the Aurigenecollaboration agreement (see Note 3(b))— 17,989 23,968Amortization of debt issuance costs144 48 56Non-cash interest (income)/expense(53) 168 149Gain on sale of fixed assets— — (22)Changes in operating assets and liabilities: Accounts receivable(614) (353) (145)Prepaid expenses and other assets267 (85) (726)Accounts payable and accrued and other liabilities(376) 2,315 1,774Total adjustments4,962 24,600 29,090Net cash used in operating activities(48,355) (35,811) (29,891)Cash Flows from Investing Activities: Purchases of investments(51,121) (57,639) (123,240)Sales/maturities of investments47,679 88,092 116,822Decrease in restricted cash/investments— — 14Expenditures for property and equipment(188) (329) (48)Proceeds from sale of fixed assets— — 24Net cash (used in)/provided by investing activities(3,630) 30,124 (6,428)Cash Flows from Financing Activities: Proceeds from issuance of common stock associated with offerings, net of issuancecosts (see Note 11)41,546 — 64,620Proceeds from issuance of common stock under the Company’s share-basedcompensation plans1,138 2,907 1,206Proceeds from new credit agreement with HealthCare Royalty45,000 — —Payment of debt issuance costs(192) — —Payment on termination of former credit agreement with BioPharma(18,303) — —Payments made on Curis Royalty’s debt(4,954) (4,273) (4,163)Net cash provided by/(used in) financing activities64,235 (1,366) 61,663Net increase/(decrease) in cash and cash equivalents12,250 (7,053) 25,344Cash and cash equivalents, beginning of period26,038 33,091 7,747Cash and cash equivalents, end of period$38,288 $26,038 $33,091Supplemental cash flow data: Cash paid for interest$3,942 $2,787 $3,303The accompanying notes are an integral part of these consolidated financial statements.94Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsNotes to Consolidated Financial Statements(1)Nature of BusinessCuris, Inc. is a biotechnology company seeking to develop and commercialize innovative drug candidates for the treatment of human cancers. As usedthroughout these consolidated financial statements, the term “the Company” refers to the business of Curis, Inc. and its wholly owned subsidiaries, exceptwhere the context otherwise requires, and the term “Curis” refers to Curis, Inc.The Company conducts its research and development programs both internally and through strategic collaborations. The Company’s clinical stage drugcandidates are CUDC-907, which is being investigated in clinical studies in patients with MYC-altered diffuse large B-cell lymphoma and solid tumors, andCA-170, for which it is currently conducting a Phase 1 study in patients with advanced solid tumors and lymphomas, and CA-4948, for which, in January2018 it initiated a Phase 1 trial in patients with advanced non-Hodgkin lymphomas, including those with MYD88 alterations. The Company’s pipeline alsoincludes CA-327, which is a pre-IND stage oncology drug candidate. The Company expects to file an IND application with the FDA for clinical testing ofCA-327 in 2018. The Company is party to a collaboration with F. Hoffmann-La Roche Ltd, or Roche, and Genentech Inc., or Genentech, a member of theRoche Group, under which Roche and Genentech are commercializing Erivedge, a first-in-class orally-administered small molecule Hedgehog signalingpathway inhibitor. Erivedge® (vismodegib) is approved for the treatment of advanced basal cell carcinoma, or BCC.In January 2015, and as amended in September 2016, the Company entered into a collaboration, option and license agreement focused on immuno-oncology and selected precision oncology targets with Aurigene Discovery Technologies Limited, or Aurigene. In September 2016, the Company enteredinto an amendment to this agreement, pursuant to which Aurigene received 10,208,333 shares of the Company's common stock in lieu of receiving up to$24.5 million of milestone and other payments from Curis (see Note 3(b)).The collaboration with Aurigene is comprised of multiple programs, and Curis has the option to exclusively license each program, including data,intellectual property and compounds associated therewith, once a development candidate is nominated within such program. In October 2015, the Companyexercised options to license two programs under this collaboration. The first licensed program is in the immuno-oncology field and the Company has namedCA-170, an orally-available small molecule antagonist of two immune checkpoints, programmed death ligand-1 (PDL1) and V domain Ig suppressor of T-cellactivation (VISTA), as the development candidate from this program. The second licensed program is in the precision oncology field and the Company hasnamed CA-4948, an orally-available small molecule inhibitor of Interleukin-1 receptor-associated kinase 4 (IRAK4) as the development candidate. InOctober 2016, the Company exercised its option to license a third program in the collaboration, and designated CA-327, a distinct orally available smallmolecule antagonist of two immune checkpoints PDL1 and T-cell immunoglobulin and mucin domain containing protein-3 (TIM3) as the developmentcandidate from this program. In March 2018, we exercised the option to license a fourth program, which is an immuno-oncology program.The Company operates in a single reportable segment, which is the research and development of innovative cancer therapeutics. The Company expectsthat any products that are successfully developed and commercialized would be used in the healthcare industry and would be regulated in the United Statesby the FDA and in overseas markets by similar regulatory authorities.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 advance and expand its research and development programs; the Company’s reliance on Aurigene tosuccessfully discover and preclinically develop drug candidates under the parties’ collaboration agreement; the Company’s reliance on Roche andGenentech to successfully commercialize Erivedge in the approved indication of advanced BCC and to progress its clinical development in indications otherthan BCC; the Company’s ability to obtain adequate financing to fund its operations; the ability of the Company and its wholly owned subsidiary, CurisRoyalty, LLC, or Curis Royalty, to satisfy the terms of its credit agreement with HealthCare Royalty Partners III, L.P, a Delaware limited partnership managedby HealthCare Royalty Management, LLC, or HealthCare Royalty; the Company’s ability to obtain and maintain necessary intellectual property protection;development by the Company’s competitors of new or better technological innovations; dependence on key personnel; the Company’s ability to complywith regulatory requirements; and the Company’s ability to execute on its overall business strategies.The Company’s future operating results will largely depend on the progress of drug candidates currently in its development pipeline and the magnitudeof payments that it may receive and makes under its current and potential future collaborations. The results of the Company’s operations may varysignificantly 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 theCompany’s preclinical studies and clinical trials for its drug candidates; Aurigene’s ability to successfully discover and develop preclinical programs underthe Company’s collaboration with Aurigene, as well as the Company’s decision to exclusively license and further develop programs under this collaboration;Roche and Genentech’s ability to successfully commercialize Erivedge; and positive results in Roche and Genentech’s ongoing clinical trials.95Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company has incurred losses and negative cash flows from operations since its inception. As of December 31, 2017, the Company had anaccumulated deficit of approximately $952.3 million. The Company anticipates that its $60.2 million of existing cash, cash equivalents and investments atDecember 31, 2017 should enable it to maintain its planned operations for at least the next twelve months from the issuance date of the financial statements.We will need to raise additional capital or incur indebtedness to continue to fund our operations in the future. The Company’s ability to raise additionalfunds 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 raisefinancing when needed, or on terms favorable to the Company. If necessary funds are not available, we may have to delay, reduce the scope of, or eliminatesome of our development programs, potentially delaying the time to market for any of our product candidates.(2)Summary of Significant Accounting Policies(a)USE OF ESTIMATESThe preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United Statesrequires management to make estimates and assumptions that affect the reported amounts and disclosure of revenue, expenses and certain assets andliabilities at the balance sheet date. Such estimates include revenue recognition, including estimates of the performance obligations under the Company’scollaboration agreements; the estimated repayment term of the Company’s debt and related short- and long-term classification; the collectability ofreceivables; the carrying value of property and equipment and intangible assets; the assumptions used in the Company’s valuation of stock-basedcompensation and the value of certain investments and liabilities. Actual results may differ from such estimates.(b)CONSOLIDATIONThe accompanying consolidated financial statements include the Company and its wholly owned subsidiaries, Curis Royalty (see Note 9) and CurisSecurities Corporation, Inc. The Company has eliminated all intercompany transactions in each of the years ended December 31, 2017, 2016 and 2015.(c)REVENUE RECOGNITIONThe Company’s business strategy includes entering into collaborative license and development agreements with biotechnology and pharmaceuticalcompanies for the development and commercialization of the Company’s drug candidates. The terms of the agreements typically include non-refundablelicense fees, funding of research and development, payments based upon achievement of clinical development and regulatory objectives, and royalties onproduct sales. The Company follows the provisions of the Financial Accounting Standards Board, or FASB, Codification Topic 605, Revenue Recognition.License Fees and Multiple Element ArrangementsNon-refundable license fees are recognized as revenue when the Company has a contractual right to receive such payment, the contract price is fixed ordeterminable, the collection of the resulting receivable is reasonably assured and the Company has no further performance obligations under the licenseagreement. Multiple element arrangements, such as license and development arrangements are analyzed to determine whether the deliverables, which ofteninclude a license and performance obligations such as research and steering committee services, can be separated or whether they must be accounted for as asingle unit of accounting in accordance with generally accepted accounting principles, or GAAP. The Company recognizes up-front license payments asrevenue upon delivery of the license only if the license has stand-alone value. If the license is considered not to have stand-alone value, the arrangementwould then be accounted for as a single unit of accounting and the license payments and payments for performance obligations are recognized as revenueover the estimated period of when the performance obligations are performed.If the Company is involved in a steering committee as part of a multiple element arrangement, the Company assesses whether its involvementconstitutes a performance obligation or a right to participate. Steering committee services that are determined to be performance obligations are combinedwith other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangementand the period over which the Company expects to complete its aggregate performance obligations.Whenever the Company determines that an arrangement should be accounted for as a single unit of accounting, it must determine the period over whichthe performance obligations will be performed and revenue will be recognized. Revenue will be recognized using either a relative performance or straight-line method. The Company recognizes revenue using the relative performance method provided that the Company can reasonably estimate the level of effortrequired to complete its performance obligations under an arrangement and such performance obligations are provided on a best-efforts basis. Direct laborhours or full-time equivalents are typically used as the measure of performance. Revenue recognized under the relative performance method would bedetermined by multiplying the total payments under the contract, excluding royalties and96Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentspayments contingent upon achievement of substantive milestones, by the ratio of level of effort incurred to date to estimated total level of effort required tocomplete the Company’s performance obligations under the arrangement. Revenue is limited to the lesser of the cumulative amount of payments received orthe cumulative amount of revenue earned, as determined using the relative performance method, as of each reporting period.If the Company cannot reasonably estimate the level of effort required to complete its performance obligations under an arrangement, the performanceobligations are provided on a best-efforts basis and the Company can reasonably estimate when the performance obligation ceases or the remainingobligations become inconsequential and perfunctory, then the total payments under the arrangement, excluding royalties and payments contingent uponachievement of substantive milestones, would be recognized as revenue on a straight-line basis over the period the Company expects to complete itsperformance obligations. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned, asdetermined using the straight-line basis, as of the period ending date.If the Company cannot reasonably estimate when its performance obligation either ceases or becomes inconsequential and perfunctory, then revenue isdeferred until the Company can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized overthe 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 Companyis expected to complete its performance obligations under an arrangement.Substantive Milestone PaymentsCollaboration agreements that contain substantive milestone payments are recognized upon achievement of the milestone only if:•such milestone is commensurate with either of the following:a)the Company’s performance to achieve the milestone (for example, the achievement of the milestone involves a degree of risk and wasnot reasonably assured at the inception of the arrangement); orb)the enhancement of the value of the deliverable as a result of a specific outcome resulting from the Company’s performance to achievethe milestone (or substantive Company effort is involved in achieving the milestone);•such milestone relates solely to past performance; and•the amount of the milestone payment is reasonable relative to all deliverables and payment terms in the arrangement.Determination as to whether a payment meets the aforementioned conditions involves management’s judgment. If any of these conditions are not met,the resulting payment would not be considered a substantive milestone, and the resulting payment would be recognized as revenue as performanceobligations are performed under either the relative performance or straight-line methods, as applicable, and in accordance with these policies as describedabove. In addition, the determination that one such payment was not a substantive milestone could prevent the Company from concluding that subsequentmilestone payments were substantive milestones and, as a result, any additional milestone payments could also be considered part of the consideration for thesingle unit of accounting and would be recognized as revenue as such performance obligations are performed under either the relative performance orstraight-line methods, as applicable. Milestones that are tied to regulatory approval are not considered probable of being achieved until such approval isreceived. Milestones tied to counterparty performance are not included in the Company’s revenue model until the performance conditions are met.Reimbursement of CostsReimbursement of research and development costs by third party collaborators is recognized as revenue provided the Company has determined that it isacting primarily as a principal in the transaction according to the provisions outlined in the FASB Codification Topic 605-45, Revenue Recognition,Principal Agent Considerations, the amounts are determinable and collection of the related receivable is reasonably assured.97Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsRoyalty RevenueSince the first quarter of 2012, the Company has recognized royalty revenues related to Genentech’s and Roche’s sales of Erivedge. Royalty revenue isrecognized upon the sale of the related products based on contractual terms, provided that the royalty amounts are fixed or determinable, collection of therelated receivable is reasonably assured and the Company has no remaining performance obligations under the arrangement. If royalties are received whenthe Company has remaining performance obligations, it expects to attribute the royalty payments to the services being provided under the arrangement andtherefore to recognize such royalty payments as such performance obligations are performed under either the relative performance or straight-line methods, asapplicable, and in accordance with these policies as described above. The Company expects to recognize royalty revenue in future quarters from Genentech’ssales of Erivedge in the U.S. and in other markets where Genentech and Roche successfully obtain marketing approval, if any (see Notes 3(a) and 9). However,Erivedge royalties will service Curis Royalty’s debt until this debt is repaid in full (see Note 9).SummaryDuring the years ended December 31, 2017, 2016 and 2015, total gross revenues are 100% from the Company’s collaboration with Genentech.(d)RESEARCH AND DEVELOPMENTResearch and development expense consists of costs incurred to discover, research and develop drug candidates. These expenses primarily include:(1) salaries and related expenses for personnel including stock-based compensation expense; (2) outside service costs, including clinical researchorganizations and contract manufacturing costs, among others; (3) sublicense payments; and (4) the costs of supplies and reagents, consulting, andoccupancy and depreciation charges. For the year ended December 31, 2017, the Company did not recognize any in-process research and developmentexpenses. The Company incurred in-process research and development expenses of $18.0 million during the year ended December 31, 2016 representing thevalue of common stock issued to Aurigene pursuant to the September 2016 amendment to the collaboration and $24.3 million during the year endedDecember 31, 2015 representing partial consideration for the rights granted to the Company under the original collaboration agreement with Aurigene inJanuary 2015 (see Note 3(b)). The Company expenses research and development costs as they are incurred.The Company recognizes cost of royalties on Erivedge royalty revenue earned from Genentech related to obligations to third-party university licensors.The Company is also incurring research and development expenses under this collaboration related to the maintenance of these third-party licenses to certainbackground technologies. In addition, the Company records research and development expense for obligations to certain third-party university licensorsupon earning payments from Genentech related to the achievement of clinical development and regulatory objectives under this collaboration. (e)CASH EQUIVALENTS AND INVESTMENTSCash equivalents consist of short-term, highly liquid investments purchased with original maturities of three months or less. All other liquidinvestments are classified as marketable securities. The Company’s short-term investments are marketable securities with original maturities of greater thanthree months from the date of purchase, but less than twelve months from the balance sheet date, and long-term investments are marketable securities withoriginal maturities of greater than twelve months from the balance sheet. Marketable securities consist of commercial paper, corporate bonds and notes, andgovernment obligations. All of the Company’s investments have been designated available-for-sale and are stated at fair value with any unrealized holdinggains or losses included as a component of stockholders’ equity and any realized gains and losses recorded in the statement of operations in the period duringwhich the securities are sold.Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component ofstockholders’ equity. Realized gains and losses, dividends and interest income are included in other income (expense). Any premium or discount arising atpurchase is amortized and/or accreted to interest income.(f)LONG-LIVED ASSETS OTHER THAN GOODWILLLong-lived assets other than goodwill consist of property and equipment. The aggregate net balances for these long-lived assets were $0.4 million and$0.4 million as of December 31, 2017 and 2016, respectively. The Company applies the guidance in FASB Codification Topic 360-10-05, Impairment orDisposal of Long-Lived Assets. If it were determined that the carrying value of the Company’s other long-lived assets might not be recoverable based uponthe existence of one or more indicators of impairment, the Company would measure an impairment based on the difference between the carrying value andfair value of the asset. The Company did not recognize any impairment charges for the years ended December 31, 2017, 2016 or 2015.98Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsPurchased equipment is recorded at cost. The Company does not currently hold any leased equipment. Depreciation and amortization are provided onthe straight-line method over the estimated useful lives of the related assets or the remaining terms of the leases, whichever is shorter, as follows:Asset ClassificationEstimated Useful LifeLaboratory equipment, computers and software3-5 yearsLeasehold improvementsLesser of life of the lease or the life of the assetOffice furniture and equipment5 years(g)GOODWILLAs of both December 31, 2017 and 2016, the Company had recorded goodwill of $9.0 million. The Company applies the guidance in the FASBCodification Topic 350, Intangibles—Goodwill and Other. During each of December 2017, 2016 and 2015, the Company completed its annual goodwillimpairment tests and determined that the Company represented a single reporting unit and as of those dates the fair value of the Company exceeded thecarrying value of its net assets. Accordingly, no goodwill impairment was recognized for the years ended December 31, 2017, 2016 and 2015.(i)TREASURY STOCKOn May 31, 2002, the Company announced that its Board of Directors had approved the repurchase of up to $3.0 million of the Company’s commonstock. The Company accounted for its common stock repurchases as treasury stock under the cost method. In 2002, the Company repurchased 1,047,707shares of its common stock at a cost of $0.9 million pursuant to this repurchase program.Each of the Company’s now-expired 2000 Stock Incentive Plan and the current Amended and Restated 2010 Stock Incentive Plan generally allowparticipants to purchase common stock upon the exercise of a stock option by delivery of shares of Company common stock held directly by the participant,with such shares of common stock valued at the closing price on the Nasdaq Global Market, or NASDAQ, on the date of exercise. On certain instances in thepast, the Company has accounted for the value of the common stock remitted to the Company in satisfaction of the exercise price as treasury stock under thecost method. As of December 31, 2017, the Company had repurchased an aggregate of 1,222,846 shares of its common stock at a total cost of $1.5 million.(j)BASIC AND DILUTED LOSS PER COMMON SHAREBasic and diluted net losses per share were determined by dividing net loss by the weighted average number of common shares outstanding during theperiod. Diluted net loss per common share is the same as basic net loss per common share for all periods presented, as the effect of the potential common stockequivalents is antidilutive due to the Company’s net loss position for all periods presented. Antidilutive securities consist of stock options outstanding as ofthe respective reporting period. Antidilutive securities as of December 31, 2017, 2016 and 2015 consisted of the following For the Year Ended December 31, 2017 2016 2015Stock options outstanding16,034,181 13,752,157 13,290,844Total antidilutive securities16,034,181 13,752,157 13,290,844(k)STOCK-BASED COMPENSATIONThe Company records stock-based compensation in accordance with FASB Codification Topic 718, Compensation—Stock Compensation, or ASC 718,which requires that the fair value of such equity instruments be recognized as an expense in the financial statements as services are performed.(l)OPERATING LEASESThe Company currently has one facility located at 4 Maguire Road in Lexington, Massachusetts under a noncancellable operating lease agreement foroffice and laboratory space. The rent payments for this facility escalate over the lease term and the Company expenses its obligations under this leaseagreement on a straight-line basis over the term of the lease (see Note 10(a)).99Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents(m)CONCENTRATION OF RISKFinancial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents, short-and long-term investments. The Company invests directly in commercial paper of financial institutions and corporations with A-/Aa3 or better long-termratings and A-1/P-1 short term debt ratings and U.S. Treasury securities. The Company maintains deposits in federally insured financial institutions in excessof federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depositoryinstitutions in which those deposits are held. The Company’s credit risk related to investments is reduced as a result of the Company’s policy to limit theamount invested in any one issue.The Company’s accounts receivable at December 31, 2017 represents amounts due from collaborators, primarily for royalties earned on sales ofErivedge by Genentech and Roche.The Company relies on third parties to supply certain raw materials necessary to produce its drug candidates, including CUDC-907, CA-170, CA-4948and CA-327, for preclinical studies and clinical trials. There are a small number of suppliers for certain raw materials that the Company uses to manufactureits drug candidates. (n)COMPREHENSIVE LOSSComprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized holdinggains and losses arising during the period on available-for-sale securities that are not other-than-temporarily impaired. (o)NEW ACCOUNTING PRONOUNCEMENTSIn September 2017, the FASB issued ASU 2017-13, which further clarified ASU 2016-02 issued in February 2016, Leases. The standard requiresorganizations that lease assets to recognize on the balance sheet assets or liabilities, as applicable, for the rights and obligations created by those leases.Additionally, the guidance modifies current guidance for lessor accounting and leveraged leases, and is effective for fiscal years beginning after December15, 2018, and interim periods within such years. Early adoption is permitted, but the Company does not anticipate electing early adoption. The Company iscurrently evaluating the impact of the adoption of this guidance on its consolidated financial statements.In May 2017, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) 2017-09, Scope of ModificationAccounting, which clarifies the scope under which modification accounting should be applied to a share-based payment award under Codification Topic718. The standard will be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2017, andearly adoption was permitted for interim or annual reporting periods beginning after January 1, 2017. The Company does not expect this guidance to have amaterial impact on its consolidated financial statements.In January 2017, the Financial Accounting Standard Board (FASB) issued Accounting Standard Update (ASU) 2017-04, Simplifying the Test forGoodwill Impairment, which simplifies the subsequent measurement of goodwill under the current standard in testing the interim or annual impairment ofgoodwill. The standard will be effective for annual reporting periods and interim periods within those annual periods beginning after December 15, 2019, andearly adoption is now permitted for interim or annual reporting periods that began after January 1, 2017. The Company does not expect the impact of thisguidance to be material to its consolidated financial statements.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments, which helps toclarify the diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows under CodificationTopic 230, Statement of Cash Flows, by addressing eight specific cash flow issues. The standard became effective for annual reporting periods and interimperiods within those annual periods, beginning after December 15, 2017. The Company does not expect this guidance to have a material impact on itsconsolidated financial statements.In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends priorguidance on accounting for equity investments and financial liabilities. The new standard amends certain aspects of accounting and disclosure requirementsfor financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes infair value recognized in results of operations. The new standard does not apply to investments accounted for under the equity method of accounting or thosethat result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at costminus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option isrequired to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in theinstrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in100Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentscombination with other deferred tax assets. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within suchyears. Early adoption is permitted but the Company does not anticipate electing early adoption. The Company does not expect the adoption of this guidanceto have a material impact on its consolidated financial statements.In May 2014, the FASB issued new revenue recognition guidance in ASC 606, Revenue from Contracts with Customers, for entities, providing a single,comprehensive model to account for revenue arising from contracts with customers. In addition, The FASB recently issued ASUs 2016-08, 2016-10, 2016-12,2016-20, 2017-13 and 2017-14 all of which are further clarifying amendments to ASU 2014-09.This new standard provides a five-step framework wherebyrevenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expectsto be entitled in exchange for those goods or services. The new standard also requires significantly expanded disclosures regarding the qualitative andquantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Twoadoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively withthe cumulative effect of initially adopting the ASU recognized at the date of initial application. The Company plans to use the modified retrospectivemethod for its adoption. To date, the Company’s sources of collaboration and other revenue have primarily been collaboration agreements. The mostsignificant differences between Topic 606 and previous guidance for license and collaboration revenue are: (i) allocating consideration to performanceobligations; and (ii) estimating and determining the timing of recognition of variable consideration received from licensees, including up-front licensepayments, contingent milestones and royalties. The guidance is effective for interim and annual periods beginning after December 15, 2017 and earlyadoption is permitted. The guidance is anticipated to be effective for the Company as of January 1, 2018. The Company has evaluated the potential impactthat ASU 2014-09 may have on the financial position and results of operations and expects the adoption of this guidance to have no material impact on itsconsolidated financial statements.(p)SEGMENT REPORTINGThe Company is engaged solely in the discovery and development of innovative drug candidates for the treatment of human cancers. Accordingly, theCompany has determined that it operates in one operating segment.(3)Research and Development Collaborations(a)GenentechIn June 2003, the Company licensed its proprietary Hedgehog pathway technologies to Genentech for human therapeutic use. The primary focus of thecollaborative research plan has been to develop molecules that inhibit the Hedgehog pathway for the treatment of various cancers. The collaboration iscurrently focused on the development of Erivedge, which is being commercialized by Genentech in the United States 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 smallmolecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatoryobjectives. Of this amount, the Company has received $59.0 million in cash milestone payments as of December 31, 2017.In addition to these payments and pursuant to the agreement, the Company, is entitled to a royalty on net sales of Erivedge that ranges from 5% to7.5%. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances, including when acompeting product that binds to the same molecular target as Erivedge is approved by the applicable regulatory authority in another country and is beingsold in such country, by a third party for use in the same indication as Erivedge, or, when there is no issued intellectual property covering Erivedge in aterritory in which sales are recorded. In 2015, the FDA and the European Medicine Agency’s Committee for Medicinal Products for Human Use, approvedanother Hedgehog signaling pathway inhibitor, Odomzo® (sonidegib), which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advancedBCC. Beginning in the fourth quarter of 2015, Genentech applied the 2% royalty reduction on United States sales of Erivedge as a result of the firstcommercial sale of Odomzo® in the United States.In November 2012, the Company formed a wholly owned subsidiary, Curis Royalty, to receive a $30.0 million loan, at an annual interest rate of 12.25%pursuant to a credit agreement between Curis Royalty and BioPharma-II (see Note 9). In connection with the loan, the Company transferred to Curis Royaltyits right to receive royalty and royalty-related payments that it receives from Genentech. The loan and accrued interest was an obligation of Curis Royalty,with no recourse to Company to be repaid using the royalty and royalty-related payments from Genentech.In March 2017, the Company and Curis Royalty entered into a new credit agreement with HealthCare Royalty Partners III, L.P., or HealthCare Royalty,for the purpose of refinancing the loan from BioPharma-II. Accordingly, HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% toCuris Royalty, which was used in part to pay off $18.4 million101Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsin remaining loan obligations to Biopharma-II under the prior loan with the residual proceeds of $26.6 million distributed to the Company as sole equitymember of Curis Royalty.The Company considers its arrangement with Genentech to be a revenue arrangement with multiple deliverables. The Company’s deliverables underthis collaboration include an exclusive license to its Hedgehog signaling pathway inhibitor technologies, research and development services for the first twoyears of the collaboration, and participation on the joint steering committee. The Company applied the provisions of the FASB Codification Topic 605-25,Revenue Recognition, Multiple Element Arrangement to determine whether the performance obligations under this collaboration should be accounted forseparately or should be accounted for as a single unit of account. The Company determined that the deliverables, specifically, the license, research anddevelopment services and steering committee participation, represented a single unit of account because the Company believes that the license, althoughdelivered at the inception of the arrangement, did not have stand-alone value to Genentech without the Company’s research and development services andsteering committee participation. During 2007, the Company reassessed its participation on the joint steering committee and concluded that its participationin the joint steering committee had become inconsequential and perfunctory. As a result, the Company determined that it had no further performanceobligations under this collaboration and consideration received after this date is recognized in the Company’s financial statements in the period in which itwas earned.As a result of its licensing agreements with various universities, the Company is obligated to make payments to these university licensors when certainnon-royalty payments are received from Genentech. Through December 31, 2017, the Company has incurred aggregate research and development expensesover the term of this collaboration of $4.4 million related to payments made to these university licensors in connection with the Company’s receipt of cashpayments from Genentech for research, development and regulatory objectives achieved related to such university licensing agreements.The Company recognized $9.8 million, $7.8 million and $8.0 million in royalty revenue under the Genentech collaboration during the year endedDecember 31, 2017, 2016 and 2015, respectively. The Company also recorded $0.5 million, $0.4 million and $0.4 million, respectively, as cost of royaltyrevenues within the costs and expenses section of its consolidated statements of operations and comprehensive loss during these same periods. Cost ofroyalty revenues is comprised of the 5% of the royalties earned by Curis Royalty with respect to Erivedge outside Australia, and 2% direct net sales inAustralia (subject to decrease to 5% of royalties on expiration of the patent in April 2019), that the Company is obligated to pay to university licensors.During the years ended December 31, 2017, 2016 and 2015, the Company also recognized “research and development” revenue of $0.2 million, $0.2million and $0.3 million, respectively, related to expenses incurred on behalf of Genentech that were incurred by the Company and for which Genentech isobligated to reimburse the Company. During the years ended December 31, 2017 and 2016, Genentech incurred expenses of $0.2 million and $0.5 million,respectively, under this collaboration which the Company is obligated to reimburse to Genentech, and which the Company has recorded as contra-revenueswhich have been net against research and development revenues in its consolidated statements of operations and comprehensive loss. The Company willcontinue to recognize revenue for expense reimbursement as such reimbursable expenses are incurred, provided that the provisions of the FASB CodificationTopic 605-45 are met.The Company had recorded as amounts receivable from Genentech under this collaboration, comprised primarily of Erivedge royalties earned in thefourth quarters of 2017 and 2016, of $3.0 million and $2.5 million, as of December 31, 2017 and 2016, respectively, in “accounts receivable” in theCompany’s current assets section of its consolidated balance sheets.(b)AurigeneIn January 2015, the Company entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercializationof small molecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigenegranted the Company an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercializeproducts containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene.During 2015, the Company exercised options to license the first two programs under this collaboration, resulting in an aggregate one-time payment of$6.0 million (satisfying the $3.0 million option exercise fee for each program) by the Company to Aurigene. Effective October 2015, the Company agreed tomake additional payments to Aurigene totaling up to $2.0 million for supplemental research, development and/or manufacturing activities in support ofthese two programs. The Company incurred and recognized $1.0 million of such costs in 2015, which was paid in 2016. The remaining $1.0 million wasincurred and recognized and paid in 2016. All payments have been recorded within research and development expense in the Company's ConsolidatedStatement of Operations and Comprehensive Loss.Also in 2015, the Company selected a preclinical program for potential further development within the immuno-oncology part of the collaborationresulting in a one-time payment of $2.0 million. In October 2016, the Company licensed the program and designated CA-327 as the development candidateas described in Note 1, resulting in a one-time payment of $1.5 million.102Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn connection with the collaboration agreement, the Company issued to Aurigene 17,120,131 shares of its common stock valued at $24.3 million at thetime of issuance in partial consideration for the rights granted to the Company under the collaboration agreement. The shares were issued pursuant to a stockpurchase agreement with Aurigene dated January 18, 2015.In September 2016, the Company and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, inexchange for the issuance by the Company to Aurigene of 10,208,333 shares of its common stock, Aurigene waived $24.5 million in potential milestonesand other payments associated with the first four programs in the collaboration that may have become due from the Company under the collaborationagreement. To the extent any of these waived milestones or other payments are not payable by the Company, e.g. in the event one or more of the milestoneevents do not occur, the Company will have the right to deduct the unused waived amount from any one or more of the milestone payment obligations tiedto achievement of commercial milestone events. The amendment also provides that, in the event supplemental program activities are performed by Aurigene,the Company will provide up to $2.0 million of additional funding for each of the third and fourth licensed program. The shares were issued pursuant to astock purchase agreement with Aurigene dated September 7, 2016.As of December 31, 2017, the Company has exercised its option to license the following three programs under the collaboration:1.IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orallyavailable small molecule inhibitor of IRAK4.2.PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. Thedevelopment candidate is CA-170, an orally available small molecule antagonist of PDL1 and VISTA.3.PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. Thedevelopment candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program. For each option to license (asdescribed above) exercised by the Company, the Company is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for,and commercialize at least one product in each of the United States, specified countries in the European Union and Japan, and Aurigene is obligated to usecommercially reasonable efforts to perform its obligations under the development plan for such licensed program in an expeditious manner.Subject to specified exceptions, Aurigene and the Company agreed to collaborate exclusively with each other on the discovery, research, developmentand commercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of thecollaboration agreement. At the Company’s option, and subject to specified conditions, it may extend such exclusivity for up to three additional one-yearperiods by paying to Aurigene additional exclusivity option fees on an annual basis. The Company exercised the first one-year exclusivity option fee in2017. The fee for this exclusivity option exercise was $7.5 million, which the Company paid in two equal installments in 2017. The Company has electednot to further exercise its exclusivity option and thus will not make the $10.0 million payment required for this additional exclusivity in 2018. As a result ofthe Company’s election to not further exercise its exclusivity option, Curis is no longer operating under broad immuno-oncology exclusivity with Aurigene.The Company has, however, as provided in the agreement, elected to exercise its option to extend exclusivity on a program-by-program, year-by-year, basisfor the IRAK4 Program and the PD1/VISTA Program, both of the licensed programs currently in clinical trials.Since January 2015, Curis has paid $14.5 million in research payments, option exercise fees and milestone payments to Aurigene, and have waived$15.5 million in milestone payments as part of the 2016 amendment.For each of the IRAK4, PD1/VISTA,PD1/TIM3 programs, and the fourth program: Curis 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 additionalindications, if any.Under the terms of the amendment, the value of common stock issued to Aurigene equaled $18.0 million based on the closing share price of theCompany’s common stock of $1.76 per share on September 6, 2016, which was the last closing price prior to execution of the amendment. As a result, theCompany recognized in-process research and development expense of $18.0 million within its consolidated statement of operations and comprehensive lossfor the year ended December 31, 2016 in recognition of the fact that any compounds that have been and may be licensed from Aurigene are in clinical orpreclinical development and will require substantial development, regulatory and marketing approval efforts in order to reach technological feasibility.103Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsIn addition to the collaboration agreement, in June 2017, the Company entered into a master development and manufacturing agreement with Aurigenefor the supply of drug substance and drug product, under which it has made cash payments to Aurigene totaling $0.8 million.(4)Fair Value of Financial InstrumentsThe Company discloses fair value measurements based on a framework outlined by GAAP which requires expanded disclosures regarding fair valuemeasurements. GAAP also defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in theprincipal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Marketparticipants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact, and (iv) willing to transact.The FASB Codification Topic 820, Fair Value Measurements and Disclosures, requires the use of valuation techniques that are consistent with themarket approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by markettransactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cashflows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace theservice capacity of an asset (replacement cost). Valuation techniques should be consistently applied. GAAP also establishes a fair value hierarchy whichrequires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value. Thestandard describes three levels of inputs that may be used to measure fair value:Level 1Quoted prices in active markets for identical assets or liabilities. Level 2Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that arenot active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term ofthe assets or liabilities. Level 3Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets orliabilities.In accordance with the fair value hierarchy, the following table shows the fair value as of December 31, 2017 and 2016 of those financial assets andliabilities that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair value. Nofinancial assets or liabilities are measured at fair value on a nonrecurring basis at December 31, 2017 and 2016. Quoted Prices inActive Markets(Level 1) OtherObservableInputs(Level 2) UnobservableInputs(Level 3) Fair Value (in thousands)As of December 31, 2017 Cash equivalents: Money market funds$35,308 $— $— $35,308Municipal bonds— 260 — 260Short-term investments: Corporate commercial paper, stock, bonds andnotes— 21,944 — 21,944Total assets at fair value$35,308 $22,204 $— $57,512104Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Quoted Prices inActive Markets(Level 1) OtherObservableInputs(Level 2) UnobservableInputs(Level 3) Fair Value (in thousands)As of December 31, 2016 Cash equivalents: Money market funds$24,542 $— $— $24,542Municipal bonds— 330 — 330Short- and long-term investments: Corporate commercial paper, stock, bonds andnotes— 18,447 — 18,447Total assets at fair value$24,542 $18,777 $— $43,319(5)InvestmentsCash equivalents consist of short-term, highly liquid investments purchased with original maturities of three months or less. All other liquidinvestments are classified as marketable securities. The Company’s short-term investments are marketable securities with original maturities of greater thanthree months from the date of purchase, but less than twelve months from the balance sheet date, and long-term investments are marketable securities withoriginal maturities of greater than twelve months from the balance sheet. Marketable securities consist of commercial paper, corporate bonds and notes, andgovernment obligations. All of the Company’s investments have been designated available-for-sale and are stated at fair value with any unrealized holdinggains or losses included as a component of stockholders’ equity and any realized gains and losses recorded in the statement of operations in the period duringwhich the securities are sold.Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component ofstockholders’ equity. Realized gains and losses, dividends and interest income are included in other income (expense). Any premium or discount arising atpurchase is amortized and/or accreted to interest income.The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2017 are as follows: AmortizedCost UnrealizedGain UnrealizedLoss Fair ValueCorporate bonds and notes—short-term$21,946 $— $(2) $21,944Total investments$21,946 $— $(2) $21,944Short-term investments have maturities ranging from one and twelve months with a weighted average maturity of 0.2 years at December 31, 2017.The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2016 are as follows: AmortizedCost UnrealizedGain UnrealizedLoss Fair ValueCorporate bonds and notes—short-term$18,451 $2 $(6) $18,447Total investments$18,451 $2 $(6) $18,447Short-term investments have maturities ranging from one and twelve months with a weighted average maturity of 0.2 years at December 31, 2016.At December 31, 2017, Curis held one debt security that had been in an unrealized loss position for less than 12 months. The fair value of this securitywas $1.5 million at December 31, 2017. Curis held no investments that have been in a continuous unrealized loss position for 12 months or longer. TheCompany evaluated its securities for other-than-temporary impairments based on quantitative and qualitative factors, and it considered the decline in marketvalue for the one debt security as of December 31, 2017 to be primarily attributable to current economic and market conditions. The Company will likely notbe required to sell this security, and does not intend to sell this security before the recovery of its amortized cost bases, which recovery is expected within thenext 12 months. Based on the Company's analysis, it does not consider this investment to be other-than-temporarily impaired as of December 31, 2017.105Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents(6)Stock Plans and Stock Based CompensationAs of December 31, 2017, the Company had two shareholder-approved, share-based compensation plans: (i) the Second Amended and Restated 2010Stock Incentive Plan, or the 2010 Plan, adopted by the Board of Directors in April and approved by shareholders in June 2017 and (ii) the Amended andRestated 2010 Employee Stock Purchase Plan, or the ESPP, adopted by the Board of Directors in April 2017 and approved by shareholders in June 2017. Inthe first quarter of 2010, the Company’s 2000 Stock Incentive Plan expired in accordance with its terms, and its 2000 Director Stock Option Plan had noavailable shares remaining under the plan. No additional awards will be made under these plans, although all outstanding awards under these plans willremain in effect until they are exercised or they expire in accordance with their terms.The Second Amended and Restated 2010 Stock Incentive PlanThe 2010 Plan permits the granting of incentive and non-qualified stock options and stock awards to employees, officers, directors, and consultants ofthe Company and its subsidiaries at prices determined by the Company’s Board of Directors. The Company can issue up to 19,000,000 shares of its commonstock pursuant to awards granted under the 2010 Plan. Options become exercisable as determined by the Board of Directors and expire up to 10 years fromthe 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 appreciationrights (“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 awardsgranted as restricted stock, restricted stock units, other stock-based awards or performance awards where the price charged for the award is less than 100% ofthe 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 ofDecember 31, 2017, the Company had only granted options to purchase shares of the Company’s common stock with an exercise price equal to the closingmarket price of the Company’s common stock on the NASDAQ Global Market on the grant date. As of December 31, 2017, 5,502,567 shares remainedavailable for grant under the 2010 Plan.During the year ended December 31, 2017, the Company’s board of directors granted options to purchase 4,629,000 shares of the Company’s commonstock to officers and employees of the Company under the 2010 Plan. These options vest and become exercisable as to 25% of the shares underlying theaward after the first year and as to an additional 6.25% of the shares underlying the award in each subsequent quarter, based upon continued employmentover 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 grantdates.During the year ended December 31, 2017, the Company’s board of directors also granted options to its non-employee directors to purchase 840,000shares of common stock under the 2010 Plan. Of these options, 840,000 will vest and become exercisable in equal monthly installments over a period of oneyear from the date of grant. All options issued to non-employee directors are exercisable at a price equal to the closing price of the Company’s common stockon the NASDAQ Global Market on the grant dates.Nonstatutory Inducement GrantsFor certain new employees we issued options as an inducement equity award under NASDAQ Listing Rule 5635(c)(4) outside of the 2010 Plan. Theoption 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 sharesunderlying the option on each successive three-month period thereafter. During the year ended December 31, 2017, the Company’s board of directors grantedinducement equity awards of 644,000 shares of common stock. These options were granted at a weighted average exercise price of $2.61, which is based onthe closing market price of the Company’s common stock on the NASDAQ Global Market on the grant date.Employee and Director GrantsVesting Tied to Service ConditionsIn determining the fair value of stock options, the Company generally uses the Black-Scholes option pricing model. As discussed below, for employeestock options with market performance conditions, the Company uses a Monte Carlo simulation valuation model. The Black-Scholes option pricing modelemploys the following key assumptions for employee and director options awarded during each of the following years: 106Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents For the Year EndedDecember 31, 2017 2016 2015Expected term (years)—Employees5.5 6.0 6.0Expected term (years)—Officers5.5 7.0 7.0Expected term (years)—Directors6.3 7.0 7.0Risk-free interest rate2.0-2.1% 1.4-1.9% 1.5-1.9%Expected volatility63-64% 63-70% 68-70%Expected dividend yieldNone None NoneThe expected volatility is based on the annualized daily historical volatility of the Company’s stock price for a time period consistent with theexpected term of each grant. Management believes that the historical volatility of the Company’s stock price best represents the future volatility of the stockprice. The risk-free rate is based on the U.S. Treasury yield in effect at the time of grant for the expected term of the respective grant. The Company has nothistorically paid cash dividends, and does not expect to pay cash dividends in the foreseeable future.The stock price volatility and expected terms utilized in the calculation involve management’s best estimates at that time, both of which impact the fairvalue of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. GAAPalso requires that the Company recognize compensation expense for only the portion of options that are expected to vest. Therefore, management calculatedan estimated annual pre-vesting forfeiture rate that is derived from historical employee termination behavior since the inception of the Company, as adjusted.If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in futureperiods.A summary of stock option activity under the Second Amended and Restated 2010 Plan, the 2000 Stock Incentive Plan, the 2000 Director Stock OptionPlan, and Nonstatutory Inducement Grants is summarized as follows: Number ofShares WeightedAverageExercisePrice perShare WeightedAverageRemainingContractual Life Aggregate IntrinsicValueOutstanding, December 31, 201613,752,157 $2.30 Granted6,113,000 2.51 Exercised(780,135) 1.36 Canceled(3,050,841) 2.33 Outstanding, December 31, 201716,034,181 $2.42 6.57 $—Exercisable at December 31, 20178,771,728 $2.54 4.92 $—Vested and unvested expected to vest15,498,301 $2.42 6.49 $—At December 31, 2017, the weighted average grant-date fair values of stock options granted with standard vesting terms during the years endedDecember 31, 2017, 2016 and 2015 were $1.43, $1.11 and $1.71 per share of common stock underlying such stock options, respectively. As of December 31,2017, there was approximately $7.4 million, including the impact of estimated forfeitures, of unrecognized compensation cost related to unvested employeestock option awards outstanding under the Company’s 2010 Plan that is expected to be recognized as expense over a weighted average period of 2.5 years.The intrinsic value of employee stock options exercised during the years ended December 31, 2017, 2016 and 2015 were $1.0 million, $2.1 million and $0.8million, respectively.Vesting Tied to Market ConditionsMonte Carlo simulation models were used to value stock options to purchase an aggregate of 1,040,000 shares of common stock granted to theCompany’s officers during the year ended December 31, 2014. Of this amount, options to purchase 640,000 shares of common stock were granted in February2014 with an exercise price of $3.09 and options to purchase 400,000 shares of common stock were granted in June 2014 with an exercise price of $1.75 pershare that contained specific market conditions. The key assumptions used in these Monte Carlo simulation models and resulting valuations are noted in thefollowing table:107Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents MarketConditionOptionsGrantedFebruary 18,2014 MarketConditionOptionsGrantedJune 2,2014Expected life (years)—officers6 6Risk-free interest rate1.9% 2.1%Volatility70% 65%DividendsNone NoneNumber of options granted640,000 400,000Fair value per share$1.20 $0.34Based on the above, the Monte Carlo simulation models calculated an aggregate fair value of $0.9 million, excluding forfeitures, related to these grantsthat are being recognized on a straight-line basis over the estimated vesting periods of the separate tranches. These awards accounted for an immaterialamount of the employee stock-based compensation expense recorded by the Company for the year ended December 31, 2016, with no expense recognized forthe year ended December 31, 2017. As of December 31, 2017, all of the options with market conditions had been canceled.Second Amended and Restated 2010 Employee Stock Purchase Plan (ESPP)The Company has reserved 10,000,000 of its shares of common stock for issuance under the ESPP. Eligible employees may purchase shares of theCompany’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 anypurchase 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 ofthe 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 planincluded two six-month purchase period per year with no defined enrollment period. As of December 31, 2017, 647,542 shares were issued under the ESPP, ofwhich 173,366 were issued during 2017. As of December 31, 2017, there were 9,352,458 shares available for future purchase under the ESPP.For the years ended December 31, 2017, 2016 and 2015, the Company recorded compensation expense related to its ESPP and calculated the fair valueof shares expected to be purchased under the ESPP using the Black-Scholes models with the following assumptions: For the Year Ended December 31, 2017 2016 2015Compensation expense recognized under ESPP$268 $48 $30Expected term6-24 months 6 months 6 monthsRisk-free interest rate1.1-1.8% 0.4-0.7% 0.06-0.5%Volatility65-76% 64-78% 55-78%DividendsNone None NoneEmployee Stock-Based Compensation ExpenseStock-based compensation for employee and director stock option grants for the years ended December 31, 2017, 2016 and 2015 of $5.4 million, $4.3million and $3.6 million, respectively, was calculated using the above valuation models and has been included in the Company’s results of operations. Thetotal fair value of vested stock options for the years ended December 31, 2017, 2016 and 2015 was $3.6 million, $3.6 million and $2.7 million, respectively.Total Stock-Based Compensation ExpenseFor the years ended December 31, 2017, 2016 and 2015, the Company recorded employee and non-employee stock-based compensation expense to thefollowing line items in its Costs and Expenses section of the Consolidated Statements of Operations and Comprehensive Loss: 108Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents For the Year Ended December 31, 2017 2016 2015Research and development expenses$1,486 $762 $1,023General and administrative expenses3,873 3,563 2,852Total stock-based compensation expense$5,359 $4,325 $3,875No income tax benefits have been recorded for the years ended December 31, 2017, 2016 or 2015, as the Company has recorded a full valuationallowance and management has concluded that it is more likely than not that the net deferred tax assets will not be realized (see Note 12).(7)Property and Equipment, netProperty and equipment consist of the following: December 31, 2017 2016Laboratory equipment, computers and software$1,736 $1,624Leasehold improvements185 185Office furniture and equipment354 371 2,275 2,180Less—Accumulated depreciation and amortization(1,909) (1,767)Total$366 $413The Company recorded depreciation and amortization expense of $0.2 million, $0.2 million and $0.2 million for the years ended December 31, 2017,2016 and 2015, respectively.During the years ended December 31, 2017, 2016 and 2015, the Company identified certain of its fully depreciated assets no longer being used. As aresult, the Company wrote off gross assets and related accumulated depreciation, totaling $0.1 million, $0.4 million and $0.1 million for the years endedDecember 31, 2017, 2016 and 2015, respectively.(8)Accrued LiabilitiesAccrued liabilities consist of the following: December 31, 2017 2016Accrued compensation$2,187 $2,026Professional fees148 157Accrued interest on debt (see Note 9)193 194Other265 348Total$2,793 $2,725(9)Debt(a)BioPharma-IIIn December 2012, Curis’ wholly-owned subsidiary, Curis Royalty, received a $30.0 million loan at an annual interest rate of 12.25% pursuant to acredit agreement between Curis Royalty and BioPharma-II. In connection with the loan, Curis transferred to Curis Royalty its right to receive royalty androyalty-related payments on the commercial sales of Erivedge that it receives from Genentech (see Note 3(a)). The loan and accrued interest was being repaidby Curis Royalty using such royalty and royalty-related payments. To secure repayment of the loan, Curis Royalty granted a first priority lien and securityinterest (subject only to permitted liens) to BioPharma-II in all of its assets and all real, intangible and personal property, including all of its rights, title andinterest in and to the royalty and royalty-related payments. The loan constituted an obligation of Curis Royalty, and was non-recourse to Curis. Under theterms of the loan, quarterly royalty payments received by Curis Royalty from Genentech were applied in the following order: to pay (i) escrow fees payableby Curis pursuant to an escrow agreement between Curis, Curis Royalty, BioPharma-II and Boston Private Bank and Trust Company, (ii) Curis’ royaltyobligations to university licensors, (iii) certain expenses incurred by BioPharma-II in connection with the credit agreement and related transactiondocuments, including enforcement of its rights in the case of an event of default under the credit agreement and (iv) expenses incurred by Curis enforcing itsright to indemnification under the collaboration agreement with Genentech. Remaining amounts were applied first to pay interest and second, to pay theprincipal on the loan. Curis remained entitled to109Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsreceive any contingent payments upon achievement of clinical development objectives. Curis Royalty retained its right to royalty payments related to salesof Erivedge following repayment of the loan.The final maturity date of the loan was the earlier of the date when the principal was paid in full or the termination of Curis Royalty’s right to receiveroyalties under the collaboration agreement with Genentech. Because the repayment of the term loan was contingent upon the level of Erivedge royaltiesreceived, the short- and long-term classification of the debt was based on the Company’s estimate of the timing of amounts to be repaid. The Company couldnot estimate when the loan would be repaid as repayment was impacted by numerous factors, all of which are beyond the Company’s control. The repaymentterm may have been shortened or extended depending on the actual level of Erivedge royalties received. In addition, if Erivedge royalties were insufficient topay the accrued interest on the outstanding loan, any unpaid interest outstanding would have been added to the principal on a quarterly basis. The length ofthe actual repayment period could have varied materially to the extent that the royalty payments Curis Royalty receives were lower than the Company’scurrent estimates, which could have arisen due to factors beyond the Company’s control, such as the sale of competing products that result in a lowering ofthe royalty rates that Curis Royalty is entitled to receive, decreased market acceptance or a failure by Genentech and/or Roche to successfully commercializeErivedge in territories where it has received regulatory approval. At any time after January 1, 2017, Curis Royalty may have, subject to certain limitations,prepaid the outstanding principal of the loan in whole or in part, at a price equal to 105% of the outstanding principal on the loan, plus accrued but unpaidinterest. The obligations of Curis Royalty under the credit agreement to repay the loan may have been accelerated upon the occurrence of an event of defaultas defined in the credit agreement.(b)HealthCare Royalty Partners IIIOn March 6, 2017, the Company and Curis Royalty entered into a credit agreement, referred to herein as the credit agreement, with HealthCare Royaltyfor the purpose of refinancing Curis’ and Curis Royalty’s existing royalty financing arrangement with BioPharma-II, referred to herein as the prior loan, withBioPharma-II. On March 22, 2017, the Biopharma-II loan was terminated in its entirety.Pursuant to the credit agreement, HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% to Curis Royalty, which was used topay off $18.4 million in remaining loan obligations to Biopharma-II under the prior loan. The remaining proceeds of $26.6 million were distributed to Curisas sole equity holder of Curis Royalty.The loan from HealthCare Royalty will be repaid from certain Erivedge royalty and royalty-related payments owed by Genentech under the Genentechcollaboration agreement, the rights to which were transferred from Curis to Curis Royalty in 2012. Under the terms of the credit agreement with HealthCareRoyalty, quarterly Erivedge royalty and royalty-related payments from Genentech will first be applied to pay: (i) escrow fees payable by the Companypursuant to an escrow agreement, (ii) the Company’s royalty obligations to academic institutions, (iii) certain expenses incurred by HealthCare Royalty inconnection with the credit agreement and related transaction documents, including enforcement of its rights in the case of an event of default under the creditagreement and (iv) expenses incurred by the Company enforcing its right to indemnification under the collaboration agreement. Subsequently, remainingamounts will be applied first, to pay interest and second, to pay principal on the loan. If royalties owed under the Genentech collaboration agreement areinsufficient to pay the accrued interest on the outstanding loan, the unpaid interest outstanding will be added to the loan principal on a quarterly basis.(c)Respective Debt Payments to BioPharma-II and HealthCare Royalty Partners IIIDuring the years ended December 31, 2017 and 2016, Curis Royalty made payments totaling $8.9 million and $7.1 million, respectively, of which $5.0million and $4.3 million have been applied to the principal, respectively, with the remainder applied to accrued interest. As of December 31, 2017, theCompany recorded short- and long-term debt of $5.9 million and $35.7 million, respectively, and at December 31, 2016, the Company recorded short- andlong-term debt of $4.9 million and $14.9 million, respectively, related to the loan, with such amounts recorded within the Company’s consolidated balancesheets.Curis Royalty is currently entitled to a royalty that escalates from 5% to 7.5% based on worldwide annual net sales of Erivedge ranging from less than$150.0 million to over $600.0 million. The royalty rate applicable to Erivedge may be decreased by 2% (such that the applicable royalty rate will range from3% to 5.5%) in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by theapplicable regulatory authority and is being sold in such country by a third party for use in the same indication as Erivedge or when there is no issuedintellectual property covering Erivedge in a territory in which sales are recorded. During the third quarter of 2015, the FDA and CHMP approved Hedgehogsignaling pathway inhibitor sonidegib, then marketed by Novartis (and now Sun Pharmaceuticals, Inc.), for use in locally advanced BCC. Genentech hasadvised us that Novartis recorded sales of sonidegib in the U.S. during the fourth quarter of 2015 and, accordingly, Genentech began reducing royalties on itsnet sales in the U.S. of Erivedge during the fourth quarter of 2015.110Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsAt December 31, 2017, the fair value of the principal portion of the debt is estimated as $41.2 million. Due to the assumptions required to estimatefuture Erivedge royalties, the expected repayment period, and weighting of various royalty projection scenarios, the fair value of the debt is measured usingLevel 3 inputs.For the year ended December 31, 2017, the Company incurred debt issuance costs totaling $0.2 million in connection with the HealthCare Royaltytransaction, all of which were incurred directly by the Company. For the year ended December 31, 2016, the Company incurred debt issuance costs totaling$0.4 million in connection with the BioPharma-II loan transaction, of which $0.2 million related to expenses that the Company paid on behalf of BioPharma-II and the remaining $0.2 million were incurred directly by the Company. All debt issuance costs incurred directly by the Company were recorded as contra-debt, which were direct deductions from the carrying amount of the related debt liability in the Company’s condensed consolidated balance sheets as ofDecember 31, 2017 and 2016 as detailed in the following table: As ofDecember 31, 2017 2016Debt, current5,919 4,987Debt issue costs, current(33) (48)Debt, current portion net of issuance costs$5,886 $4,939Debt, long-term35,802 14,992Debt issue costs, long-term(133) (71)Debt, net of current portion and issuance costs$35,669 $14,921All issuance costs are being amortized over the estimated term of the debt using the straight-line method which approximates the effective interestmethod.For the years ended December 31, 2017, 2016 and 2015, the Company recognized interest expense related to the loans with BioPharma-II andHealthCare Royalty of $3.9 million, $2.8 million and $3.3 million within the Company’s Consolidated Statement of Operations, comprised of interestaccrued on the outstanding principal of the loan and amortization of debt issuance costs. The assumptions used in determining the expected repayment termof the debt and amortization period of the issuance costs requires management to make estimates that could impact the short- and long-term classification ofthese costs, as well as the period over which these costs will be amortized. In addition, the Company recorded related accrued interest on the debt of $0.2million and $0.2 million as of December 31, 2017 and 2016, respectively, with such amounts included in the Company’s accrued liabilities section of itsconsolidated balance sheets.Future payments of principal on the loan will require application of these same assumptions and will be used to estimate short- and long-termclassification of the debt within the Company’s consolidated balance sheets, and these assumptions include a reduction in the Company’s forecastedroyalties related to a competing product for the expected repayment term.At December 31, 2017, the Company estimates that its future payments of principal on the loan are as follows: Principal2018$5,91920196,92320208,13320219,438202210,992Thereafter316Total payments41,721Less current portion, gross(5,919)Total long-term debt obligations, gross$35,802(10)Commitments(a)OPERATING LEASESThe Company is party to a lease agreement with the Trustees of Lexington Office Realty Trust pursuant to which the Company leases 24,529 square feetof property that is used for office, research and laboratory space located at 4 Maguire Road in Lexington, Massachusetts.The term of the 4 Maguire Road lease agreement commenced on December 1, 2010, and was set to expire in February 2018. The Company had theoption to extend the term for one additional five-year period upon the Company’s written notice to111Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsthe lessor at least one year and no more than 18 months in advance of the extension. On November 1, 2017, the Company entered into a second amendmentto the lease agreement pursuant to which the Company agreed to extend the lease for an additional two-year period. The term of the lease amendmentcommences on March 1, 2018, and expires on February 29, 2020. The amendment provides for no option to extend the term beyond the two-year period, nordoes it provide an option for early termination of the lease.The total cash obligations for the base rent over the initial term of the lease agreement and the extended term of the lease agreement were approximately$4.4 million and $2.0 million, respectively. In addition to the base rent, the Company is also responsible for its share of operating expenses and real estatetaxes, in accordance with the terms of the lease agreement. The Company has provided a security deposit to the lessor in the form of an irrevocable letter ofcredit in the original amount of $0.3 million. The original deposit has been reduced throughout the lease term since its inception to $0.2 million during 2017and 2016, respectively, in accordance with the terms of the lease. These amounts have been classified as the restricted investments in the Company’sConsolidated Balance Sheet as of December 31, 2017 and 2016.The Company’s remaining operating lease commitments for all leased facilities with an initial or remaining term of at least one year are as follows:Year Ending December 31, 201893520191,0012020168Total minimum payments$2,104Rent expense for all operating leases was $0.7 million for the year ended December 31, 2017 and $0.6 million for each of the years ended December 31,2016 and 2015, respectively. The related deferred rent is included in accrued liabilities and other long-term liabilities in the Company’s consolidatedbalance sheet as of December 31, 2017 and 2016.(b)LICENSE AGREEMENTSIn exchange for the right to use licensed technology in its research and development efforts, the Company has entered into various license agreements.These agreements generally stipulate that the Company pay an annual license fee and is obligated to pay royalties on future revenues, if any, resulting fromuse of the underlying licensed technology. Such revenues may include, for example, up-front license fees, contingent payments upon collaborators’achievement of development and regulatory objectives, and royalties. In addition, some of the agreements commit the Company to make contractuallydefined payments upon the attainment of scientific or clinical milestones. The Company expenses these payments as they are incurred and expenses royaltypayments as related future product sales or as royalty revenues are recorded. The Company accrues expenses for scientific and clinical objectives over theperiod that the work required to meet the respective objective is completed, provided that the Company believes that the achievement of such objective isprobable. The Company incurred license fee expenses within the “Research and development” line item of its “Costs and expenses” section of itsconsolidated statement of operations for the years ended December 31, 2017, 2016 and 2015, of $7.5 million, $5.5 million and $9.8 million, respectively. Ofthe aggregate amount recognized for the year ended December 31, 2017, $7.5 million related to payments the Company made pursuant to its Aurigenecollaboration (see Note 3(b)). For the years ended December 31, 2017, 2016 and 2015, the Company also recognized $0.5 million, $0.4 million and $0.4million as cost of royalty revenues in its Consolidated Statements of Operations and Comprehensive Loss related to such obligations (see Note 3(a)).During the year ended December 31, 2016 and 2015, pursuant to the amendment and original collaboration agreement with Aurigene, the Companyalso recognized expense of $18.0 million and $24.3 million, respectively, related to partial consideration for the rights granted to the Company under theamendment to the collaboration agreement and the original collaboration agreement within the in-process research and development expense line item of theconsolidated statements of operations and comprehensive loss (see Note 3(b)).(11)Common Stock(a)2017 Public Offering of Common StockOn September 18, 2017, the Company entered into an underwriting agreement with Robert W. Baird & Co., Incorporated, or Baird, as underwriter,pursuant to which the Company sold and issued 20,000,000 shares of the Company’s common stock. The underwriter agreed to purchase the shares from theCompany pursuant to the underwriting agreement at a price of $1.78, per share, offering price to the public was $1.85 per share. Under the terms of theunderwriting agreement, the Company also granted the underwriter an option, exercisable for 30 days, to purchase up to an additional 3,000,000 shares ofcommon stock at the public offering price per share less underwriting discounts and commissions. The underwriter's option was not exercised. The Companyreceived net proceeds from the sale of the shares, after deducting the underwriting discounts and commissions112Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsand estimated offering expenses, of $35.3 million. The Company incurred offering expenses of $0.3 million related to this transaction.(b)2015 Public Offering of Common StockOn February 25, 2015, the Company entered into an underwriting agreement with Cowen and Company, or Cowen, acting for itself and asrepresentative of the named underwriters, relating to an underwritten public offering of 21,818,181 shares of the Company’s common stock. The offeringprice to the public was $2.75 per share, and the underwriters agreed to purchase the shares from the Company pursuant to the underwriting agreement at aprice of $2.585 per share. Under the terms of the underwriting agreement, the Company granted the underwriters an option, exercisable for 30 days, topurchase up to an additional 3,272,727 shares of common stock at the public offering price per share less the underwriting discounts and commissions. Theunderwriters exercised this option in full on February 25, 2015. On March 2, 2015, the Company completed the public offering of 25,090,908 shares ofcommon stock. The Company received net proceeds from the sale of the shares, after deducting the underwriting discounts and commissions and estimatedoffering expenses, of $64.6 million.(c)2015 Sales Agreement with CowenOn July 2, 2015, the Company entered into a sales agreement with Cowen, pursuant to which the Company may sell from time to time up to $30.0million of the Company’s common stock through an “at-the-market” equity offering program under which Cowen will act as sales agent. Subject to the termsand conditions of the sales agreement, Cowen may sell the common stock by methods deemed to be an “at-the-market” offering as defined in Rule 415promulgated under the Securities Act of 1933, as amended, including sales made directly on the NASDAQ Global Market, on any other existing tradingmarket 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, Cowen mayalso sell the common stock by any other method permitted by law, including in negotiated transactions. Cowen will use its commercially reasonable effortsconsistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the NASDAQ Global Marketto sell on the Company’s behalf all of the shares requested to be sold by the Company. The Company has no obligation to sell any of the common stockunder the sales agreement. Either the Company or Cowen may at any time suspend solicitations and offers under the sales agreement upon notice to the otherparty. The sales agreement may be terminated at any time by either the Company or Cowen upon written notice to the other party as specified in the salesagreement. The aggregate compensation payable to Cowen shall be 3% of the gross sales price of the common stock sold by Cowen pursuant to the salesagreement. Each party has agreed in the sales agreement to provide indemnification and contribution against certain liabilities, including liabilities under theSecurities Act, subject to the terms of the sales agreement. The shares to be sold under the sales agreement, if any, may be sold and issued pursuant to thecurrently-effective universal shelf registration statement on Form S-3, filed with the Securities and Exchange Commission on July 2, 2015. The Companysold 2,103,981 shares of common stock under this sales agreement for net proceeds of $6.2 million during the year ended December 31, 2017.(12)Income TaxesFor the years ended December 31, 2017, 2016 and 2015, the Company did not record any federal or state income tax expense given its continuedoperating losses.On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act ("Tax Reform Act"). The legislation significantlychanges U.S. tax law by, among other things, lowering corporate income tax rates, implementing a territorial tax systems and imposing a repatriation tax ondeemed repatriated earnings of foreign subsidiaries. The Tax Reform Act permanently reduces the U.S. corporate income tax rate from a maximum of 35% toa flat 21% rate, effective January 1, 2018.The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognizedfor the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and theirrespective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which thosetemporary differences are expected to reverse. As a result of the reduction in the U.S. corporate income tax rate from the maximum 35% to 21% under the TaxReform Act, the Company revalued its ending deferred tax assets and liabilities at December 31, 2017. This revaluation resulted in a reduction to theCompany’s deferred tax asset of $55.6 million. Due to the Company's full valuation allowance, no provisional tax expense or benefit associated with theremeasurement was recognized in the Company's consolidated statement of income for the year ended December 31, 2017. However, the reduction of theU.S. federal corporate tax rate from the maximum 35% to 21% resulted in increases to the amounts reflected “Change in valuation allowance” and “Deferredrate change” captions for the year ended December 31, 2017 in the Company’s tax reconciliation table below compared to those amounts disclosed for theyear ended December 31, 2016. The change in the U.S. federal corporate tax rate, which is effective January 1, 2018, is also reflected in the Company’sdeferred tax table below. 113Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe provision for income taxes for continuing operations was at rates different from the U.S. federal statutory income tax rate for the following reasons: For the Year EndedDecember 31, 2017 2016 2015Statutory federal income tax rate34.0 % 34.0 % 34.0 %State income taxes, net of federal benefit4.4 % 5.0 % 5.1 %Research and development tax credits2.7 % 1.3 % 1.4 %Orphan drug tax credits10.9 % 10.5 % — %Deferred compensation(0.8)% (0.5)% (0.4)%Interest expense(0.5)% (0.4)% (0.5)%Deferred rate change(104.4)% — % — %Permanent adjustments and other(5.2)% (0.2)% 0.1 %Change in valuation allowance58.9 % (49.7)% (39.7)%Effective income tax rate— — —The principle components of the Company’s deferred tax assets at December 31, 2017 and 2016, respectively, are as follows: December 31, 2017 2016Deferred Tax Assets: NOL carryforwards$63,688 $92,012Research and development tax credit carryforwards15,340 13,404Orphan drug tax credit carryforwards15,580 10,148Depreciation and amortization11,663 18,242Capitalized research and development expenditures32,550 35,848Stock options4,948 5,507Accrued expenses and other155 176Total Gross Deferred Tax Asset143,924 175,337Valuation Allowance(143,924) (175,337)Net Deferred Tax Asset$— $—The classification of the above deferred tax assets is as follows: December 31, 2017 2016Deferred Tax Assets: Current deferred tax assets$— $—Non-current deferred tax assets143,924 175,337Valuation Allowance(143,924) (175,337)Net Deferred Tax Asset$— $—As of December 31, 2017, the Company had federal and state net operating losses, or NOLs, of $273.5 million and $98.6 million, respectively, andfederal and state research and experimentation credit carryforwards of approximately $11.6 million and $4.7 million, respectively, which will expire atvarious dates starting in 2018 through 2036. As of December 31, 2017, the Company also had orphan drug tax credit carryforwards of $15.6 million, thesecredits relate to qualified expenses incurred for CUDC-907 since receiving the Orphan Drug designation. As required by U.S. GAAP, the Company’smanagement has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, and has determined that it is morelikely than not that the Company will not recognize the benefits of the deferred tax assets. Accordingly, a valuation allowance of approximately $143.9million has been established at December 31, 2017. The benefit of deductions from the exercise of stock options is included in the NOL carryforwards.The valuation allowance (decreased)/increased approximately $(31.4) million, $30.0 million and $23.4 million during the years ended December 31,2017, 2016 and 2015. The current year decrease in the valuation allowance is primarily due to the114Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contentsimpact of the Tax Reform Act on the ending deferred assets which offset the current year increase in net operating loss carryforwards. The increase in 2016and 2015 is due primarily to the increase in net operating loss carryforwards and tax credits.Utilization of the NOL and research and development, or R&D, credit carryforwards may be subject to a substantial annual limitation under Section 382of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownershipchanges may limit the amount of NOL and R&D credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. TheCompany has not completed a study to assess whether a change of control has occurred or whether there have been multiple changes of control since theCompany’s formation because the Company continues to maintain a full valuation allowance on its NOL and R&D credit carryforwards. In addition, therecould be additional ownership changes in the future, which may result in additional limitations in the utilization of the carryforward NOLs and credits, andthe Company does not expect to have any taxable income for the foreseeable future.An individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s financial statements. AtDecember 31, 2017 and 2016, the Company had no unrecognized tax benefits. The Company has not, as yet, conducted a study of its R&D creditcarryforwards. This study may result in an adjustment to the Company’s R&D credit carryforwards, however, until a study is completed and any adjustment isknown, no amounts are being presented as an uncertain tax position under Topic 740. A full valuation allowance has been provided against the Company’sR&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impactto the consolidated balance sheet or statement of operations if an adjustment were required.The tax years 2002 through 2017 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in theU.S., as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service, or IRS, or state tax authoritiesif they have or will be used in a future period. The Company is currently not under examination by the IRS or any other jurisdictions for any tax years. TheCompany recognizes both accrued interest and penalties related to unrecognized benefits in income tax expense. The Company has not recorded any interestor penalties on any unrecognized tax benefits since its inception.On December 22, 2017, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations whena registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete theaccounting for certain income tax effects of the Tax Reform Act. The Company has recognized the provisional tax impacts related to the revaluation of thedeferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimateimpact may differ from these provisional amounts due to, among other things, additional analysis, changes in interpretations and assumptions the Companyhas made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Reform Act. The accounting isexpected to be complete when the 2017 U.S. corporate income tax return is filed in 2018.(13)Related Party Transactions(a)Agreements with Daniel R. PasseriOn June 2, 2014, Daniel R. Passeri resigned as Chief Executive Officer of the Company and the Board of Directors appointed Mr. Passeri to serve as theVice Chairman of the Board of Directors. Also on June 2, 2014, the Company and Mr. Passeri entered into a consulting agreement. The agreement was for aninitial term of one year, subject to renewal or earlier termination by the parties. The agreement was renewed by the parties through May 31, 2016, after whichthe agreement between Mr. Passeri and the Company was terminated. Pursuant to the terms of the agreement, Mr. Passeri was paid an hourly fee or a monthlyretainer as consideration for the services rendered by Mr. Passeri to the Company. During the five months ended May 31, 2016, Mr. Passeri providedconsulting services to the Company on intellectual property, corporate and strategic matters in exchange for payments of $30,000 per month.On September 2, 2016, the Company and Mr. Passeri entered into a letter agreement pursuant to which Mr. Passeri resigned as director and ViceChairman of the Company's board of directors, which became effective on September 14, 2016. Pursuant to the terms of the Letter Agreement, and inrecognition of his many years of service to the Company in varying roles, including as a director and Vice Chairman of the Board, and formerly as ChiefExecutive Officer, President, and as a consultant, the Board authorized a $0.3 million recognition bonus payment to Mr. Passeri and also approved amodification to Mr. Passeri’s vested common stock options such that the exercise period for all such options shall be 24 months. Mr. Passeri agreed toprovide continued assistance to the Company, without further remuneration, for up to twenty-four months, if and when requested by the Board of Directors orthe Chief Executive Officer. The letter agreement also contains other customary terms and conditions relating to Mr. Passeri’s end of service with theCompany.115Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsThe Company recognized expenses related to the consulting and letter agreements of $0.4 million and $0.2 million during the years endedDecember 31, 2016 and 2015, respectively.(b)Agreement with Director - Lori A. KunkelOn November 11, 2016, the Company's board of directors elected Lori A. Kunkel, M.D., to serve as a class II director until the 2019 Annual Meeting ofStockholders and thereafter until her successor is duly elected and qualified. Prior to Dr. Kunkel’s election as a director, the Company were party to aconsulting agreement dated August 21, 2013 with D2D, LLC, a limited liability company owned by Dr. Kunkel, under which Dr. Kunkel providedconsulting services to the Company related to oncology clinical evaluation and development. The Company and Dr. Kunkel terminated the D2D consultingagreement on June 30, 2015, and entered into a new consulting agreement on July 1, 2015. The Company and Dr. Kunkel terminated the July 2015consulting agreement in connection with her election as a member of the Board of Directors. From January 1, 2015 until Dr. Kunkel’s election to theCompany's board of directors, Dr. Kunkel has received aggregate payments from the Company of $0.1 million and received options in connection with herJuly 2015 consulting agreement to purchase an aggregate of 150,000 shares of our common stock at a weighted average exercise price of $3.33 per share.The Company recognized expenses related to the consulting and letter agreements of $0.1 million during the year ended December 31, 2016.(14)Retirement Savings PlanThe Company has a 401(k) retirement savings plan covering substantially all of the Company’s employees. For the years ended December 31, 2017,2016 and 2015, the Company made matching contributions of $0.3 million, $0.2 million and $0.2 million, respectively.(15)Selected Quarterly Financial Data (Unaudited)The following are selected quarterly financial data for the years ended December 31, 2017 and 2016: Quarter Ended March 31,2017 June 30,2017 September 30,2017 December 31, 2017Revenues$2,131 $2,061 $2,444 $3,262Loss from operations(15,053) (13,109) (14,471) (7,127)Net loss(15,742) (14,090) (15,457) (8,028)Net loss per common share (basic and diluted)$(0.11) $(0.10) $(0.11) $(0.05)Weighted average common shares (basic and diluted)142,011,776 143,786,705 146,514,196 164,008,252 Quarter Ended March 31,2016 June 30,2016 September 30,2016 December 31, 2016Revenues$1,726 $1,680 $1,759 $2,362Loss from operations(8,807) (10,680) (27,789) (10,763)Net loss(9,441) (11,290) (28,345) (11,335)Net loss per common share (basic and diluted)$(0.07) $(0.09) $(0.21) $(0.08)Weighted average common shares (basic and diluted)129,019,984 129,270,639 132,065,947 140,715,621The net loss amounts presented for the quarters ended March 31, 2017 and September 30, 2017 include milestone payments of $3.8 million made underthe Company’s collaboration with Aurigene, which were recognized as research and development expenses (see Note 3(b)).116Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure Controls & ProceduresOur management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controlsand procedures as of December 31, 2017. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the ExchangeAct, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we fileor submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company inthe reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principalexecutive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarilyapplies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls andprocedures as of December 31, 2017, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls andprocedures were effective.Management’s report on internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is included inItem 8 of this annual report on Form 10-K and is incorporated herein by reference.Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2017. In making this assessment,management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control—Integrated Framework.Changes in Internal Control Over Financial ReportingNo changes in our internal control over financial reporting occurred during the fourth quarter of the fiscal year ended December 31, 2017 that havematerially affected, or are reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B.OTHER INFORMATIONNone.PART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEInformation concerning directors that is required by this Item 10 will be set forth in our proxy statement for our 2018 annual meeting of stockholdersunder the headings “Directors and Nominees for Director,” “Board Committees” and “Section 16(a) Beneficial Ownership Reporting Compliance,” whichinformation is incorporated herein by reference. The information concerning our code of ethics is set forth in our proxy statement under the heading “Code ofBusiness Conduct and Ethics.” The name, age, and position of each of our executive officers is set forth under the heading “Executive Officers of theRegistrant” in Part I of this Annual Report on Form 10-K, which information is incorporated herein by reference.ITEM 11.EXECUTIVE COMPENSATIONInformation required by this Item 11 will be set forth in our proxy statement for our 2018 annual meeting of stockholders under the headings“Executive and Director Compensation and Related Matters,” “Compensation Committee Interlocks and Insider Participation” and “CompensationCommittee Report,” which information is incorporated herein by reference.117Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSInformation required by this Item 12 relating to security ownership of certain beneficial owners and management will be set forth in our 2018 proxystatement under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference. Informationrequired by this Item 12 relating to securities authorized for issuance under equity compensation plans will be set forth in our 2018 proxy statement under thecaption “Executive and Director Compensation and Related Matters—Securities Authorized for Issuance Under Equity Compensation Plans” and isincorporated herein by reference.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEInformation required by this Item 13 will be set forth in our proxy statement for our 2018 annual meeting of stockholders under the headings “Policiesand Procedures for Related Person Transactions,” “Determination of Independence” and “Board Committees,” which information is incorporated herein byreference.ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESInformation required by this Item 14 will be set forth in our proxy statement for our 2018 annual meeting of stockholders under the heading“Independent Registered Public Accounting Firm’s Fees and Other Matters,” which information is incorporated herein by reference.PART IVITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES(a)(1) Financial Statements. Pagenumberin thisreportCuris, Inc. and Subsidiaries Report of Independent Registered Public Accounting Firm89Consolidated Balance Sheets as of December 31, 2017 and 201691Consolidated Statements of Operations and Comprehensive Loss for the Years Ended December 31, 2017, 2016 and 201592Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2017, 2016 and 201593Consolidated Statements of Cash Flows for the Years Ended December 31, 2017, 2016 and 201594Notes to Consolidated Financial Statements95(a)(2) Financial Statement Schedules.All schedules are omitted because they are not applicable or the required information is shown in the Financial Statement or Notes thereto.(a)(3) List of Exhibits.118Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated by ReferenceExhibitNo. Description Link toFiling Form SEC FilingDate ExhibitNumber Filed withthis 10-K Articles of Incorporation and By-laws 3.1 Restated Certificate of Incorporation of Curis, Inc., asamended Link 10-K 2/29/2016 3.1 3.2 Certificate of Designations of Curis, Inc. Link S-3 (333-50906) 8/10/2001 3.2 3.3 Amended and Restated By-laws of Curis, Inc. Link 10-K 2/29/2016 3.3 Instruments defining the rights of security holders,including indentures 4.1 Form of Curis Common Stock Certificate Link 10-K 3/1/2004 4.1 Material contracts—Management Contracts andCompensatory Plans #10.1 Employment Agreement, dated June 2, 2014, by andbetween Curis, Inc. and Ali Fattaey, Ph.D. Link 10-Q 8/7/2014 10.1 #10.2 Amendment to Employment Agreement, dated March 7,2017, by and between Curis, Inc. and Ali Fattaey, Ph.D. Link 10-K 3/9/2017 10.2 #10.3 Employment Agreement, dated March 29, 2016, by andbetween Curis, Inc. and James E. Dentzer. Link 10-Q 5/9/2016 10.1 #10.4 Amendment to Employment Agreement, dated March 7,2017, by and between Curis, Inc. by and between Curis,Inc. and James E. Dentzer Link 10-K 3/9/2017 10.4 #10.5 Employment Agreement, dated February 29, 2016, byand between Curis, Inc. and Mani Mohindru, Ph.D. Link 10-Q 5/9/2016 10.3 #10.6 Amendment to Employment Agreement , dated March 7,2017 by and between Curis, Inc. and Mani MohindruPh.D. Link 10-K 3/9/2017 10.6 #10.7 Employment Agreement, dated February 29, 2016, byand between Curis, Inc. and David Tuck, M.D. Link 10-Q 5/9/2016 10.2 #10.8 Amendment to Employment Agreement, dated March 7,2017 by and between Curis, Inc. and David Tuck, M.D. Link 10-K 3/9/2017 10.8 #10.9 Form of Indemnification Agreement, by and betweenCuris, Inc. and each non-employee director of the Boardof Directors of Curis, Inc. Link 10-Q 8/7/2014 10.3 #10.10 Curis 2000 Stock Incentive Plan Link S-4/A (333-32446) 5/31/2000 10.71 #10.11 Curis 2000 Director Stock Option Plan Link S-4/A (333-32446) 5/31/2000 10.72 #10.12 Form of Incentive Stock Option Agreement for awardsgranted to named executive officers under Curis’ 2000Stock Incentive Plan Link 10-Q 10/26/2004 10.2 #10.13 Form of Non-statutory Stock Option Agreement forawards granted to directors and named executive officersunder Curis’ 2000 Stock Incentive Plan Link 10-Q 10/26/2004 10.3 119Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated by ReferenceExhibitNo. Description Link toFiling Form SEC FilingDate ExhibitNumber Filed withthis 10-K#10.14 Form of Non-statutory Stock Option Agreement forawards granted to non-employee directors under Curis’2000 Director Stock Option Plan Link 10-Q 10/26/2004 10.4 #10.15 Curis 2010 Stock Incentive Plan Link Def 14A 4/16/2010 Exhibit A #10.16 Curis 2010 Employee Stock Purchase Plan Link Def 14A 4/16/2010 Exhibit B #10.17 Form of Incentive Stock Option Agreement for awardsgranted to named executive officers under Curis’ 2010Stock Incentive Plan Link 8-K 6/4/2010 10.1 #10.18 Form of Non-Statutory Stock Option Agreement forawards granted to directors and named executive officersunder Curis’ 2010 Stock Incentive Plan Link 8-K 6/4/2010 10.2 #10.19 Form of Restricted Stock Agreement for awards grantedto directors and named executive officers under Curis’2010 Stock Incentive Plan Link 8-K 6/4/2010 10.3 #10.20 Curis Amended and Restated 2010 Stock Incentive Plan,as amended Link 8-K 5/28/2015 99.1 #10.21 Form of Incentive Stock Option Agreement for awardsgranted to named executive officers under Curis’Amended and Restated 2010 Stock Incentive Plan, asamended Link X#10.22 Form of Non-Statutory Stock Option Agreement forawards granted to directors and named executive officersunder Curis’ Amended and Restated 2010 StockIncentive Plan, as amended Link X#10.23 Form of Restricted Stock Agreement for awards grantedto directors and named executive officers under Curis’Amended and Restated 2010 Stock Incentive Plan, asamended Link X#10.24 Form of Incentive Stock Option Agreement (OnlineAcceptance) for awards granted to named executiveofficers under Curis’ Amended and Restated 2010 StockIncentive Plan Link 10-K 3/9/2017 10.21 #10.25 Form of Nonstatutory Stock Option Agreement (OnlineAcceptance) granted to directors and named executiveofficers under Curis’ Amended and Restated 2010 StockIncentive Plan Link 10-K 3/9/2017 10.22 #10.26 Curis Second Amended and Restated 2010 StockIncentive Plan Link 8-K 5/22/2017 99.1 #10.27 Form of Incentive Stock Option Agreement for awardsgranted to named executive officers under Curis’ SecondAmended and Restated 2010 Stock Incentive Plan Link X#10.28 Form of Non-Statutory Stock Option Agreement forawards granted to directors and named executive officersunder Curis’ Second Amended and Restated 2010 StockIncentive Plan Link X120Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents#10.29 Form of Restricted Stock Agreement for awards grantedto directors and named executive officers under Curis’Second Amended and Restated 2010 Stock IncentivePlan Link X#10.30 Form of Nonstatutory Stock Option Agreement -Inducement Grant pursuant to NASDAQ Stock MarketRule 5635(c)(4) Link S-8 1/6/2017 99.1 #10.31 Curis Amended and Restated 2010 Employee StockPurchase Plan, as amended Link X Material contracts—Leases #10.32 Lease, dated September 16, 2010, by and between Curis,Inc. and the Trustees of Lexington Office Realty Trustrelating to the premises at 4 Maguire Road, Lexington,Massachusetts Link 8-K 9/21/2010 10.1 #10.33 Second Amendment to Lease, dated November 1, 2017,by and between Curis, Inc. and the Trustees of LexingtonOffice Realty Trust relating to the premises at 4 MaguireRoad, Lexington, Massachusetts Link 10-Q 11/7/2017 10.2 121Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated by ReferenceExhibitNo. Description Link toFiling Form SEC FilingDate ExhibitNumber Filed withthis 10-K Material contracts—Financing Agreements †10.34 Credit Agreement, dated November 27, 2012, by andbetween Curis, Inc., Curis Royalty LLC, a wholly-ownedsubsidiary of Curis, Inc. and BioPharma Secured DebtFund II Sub, S.à r.l. Link 10-K 3/13/2013 10.31 10.35 Consent and Payment Direction Letter Agreement, datedNovember 20, 2012 and effective as of December 11,2012 by and between Curis, Inc., Curis Royalty LLC andGenentech, Inc. Link 10-K 3/13/2013 10.32 †10.36 Credit Agreement, dated March 3, 2017, by and betweenCuris, Inc., Curis Royalty LLC, a wholly-ownedsubsidiary of Curis, Inc. and HealthCare Royalty PartnersIII, L.P. Link 10-K 3/9/2017 10.27 10.37 Consent and Payment Direction Letter Agreement, datedMarch 3, 2017 by and between Curis, Inc., Curis RoyaltyLLC and Genentech, Inc. Link 10-K 3/9/2017 10.28 †10.38 Purchase and Sale Agreement, dated as of December 11,2012 between Curis and Curis Royalty Link 10-K 3/13/2013 10.33 10.39 Escrow Agreement, dated December 11, 2012, by andbetween Curis, Curis Royalty LLC, a wholly-ownedsubsidiary of Curis, BioPharma Secured Debt Fund IISub, S.à r.l., a Luxembourg limited liability companymanaged by Pharmakon Advisors and Boston PrivateBank and Trust Company Link 10-K 3/13/2013 10.34 10.40 Escrow Agreement, dated March 22, 2017, by andbetween Curis Royalty LLC, HealthCare RoyaltyPartners III, L.P., Curis, Inc. and Boston Private Bank andTrust Company Link 10-Q 5/4/2017 10.1 Material contracts—License and CollaborationAgreements †10.41 Collaborative Research, Development and LicenseAgreement, dated June 11, 2003, by and between Curis,Inc. and Genentech, Inc. Link 10-Q 8/6/2015 10.1 †10.42 Collaboration, License and Option Agreement, datedJanuary 18, 2015, by and between Curis, Inc. andAurigene Discovery Technologies Limited Link 10-K 2/24/2015 10.32 †10.43 First Amendment to Collaboration, License and OptionAgreement, dated September 7, 2016, by and betweenCuris, Inc. and Aurigene Discovery TechnologiesLimited Link 10-Q 11/3/2016 10.2 122Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents Incorporated by ReferenceExhibitNo. Description Link toFiling Form SEC FilingDate ExhibitNumber Filed withthis 10-K Material contracts—Miscellaneous 10.44 Sales Agreement, dated July 2, 2015, by and betweenCuris, Inc. and Cowen and Company, LLC Link S-3 7/2/2015 1.2 10.45 Underwriting Agreement, dated September 13, 2017, byand between Curis, Inc. and Robert W. Baird & Co.Incorporated Link 8-K 9/15/2017 1.1 10.46 Common Stock Purchase Agreement, dated January 18,2015, by and between Curis, Inc. and AurigeneDiscovery Technologies Limited Link 10-K 2/24/2015 10.34 10.47 Stock Purchase Agreement, dated September 7, 2016, byand between Curis, Inc. and Aurigene DiscoveryTechnologies Limited Link 10-Q 11/3/2016 10.3 10.48 Registration Rights Agreement, dated January 18, 2015,by and between Curis, Inc. and Aurigene DiscoveryTechnologies Limited Link 10-K 2/24/2015 10.35 10.49 Registration Rights Agreement, dated September 7,2016, by and between Curis, Inc. and AurigeneDiscovery Technologies Limited Link 10-Q 11/3/2016 10.4 Code of Conduct 14 Amended and Restated Code of Business Conduct andEthics Link X Additional Exhibits 21 Subsidiaries of Curis Link X23.1 Consent of PricewaterhouseCoopers LLP Link X31.1 Certification of the Chief Executive Officer pursuant toRule 13a-14(a) of the Exchange Act/15d-14(a) of theExchange Act Link X31.2 Certification of the Chief Financial Officer pursuant toRule 13a-14(a) of the Exchange Act/15d-14(a) of theExchange Act Link X32.1 Certification of the Chief Executive Officer pursuant toRule 13a-14(b)/15d-14(b) of the Exchange Act and 18U.S.C. Section 1350 Link X32.2 Certification of the Chief Financial Officer pursuant toRule 13a-14(b)/15d-14(b) of the Exchange Act and 18U.S.C. Section 1350 Link X101.INS XBRL Instance Document X101.SCH XBRL Taxonomy Extension Schema Document X101.CAL XBRL Taxonomy Extension Calculation LinkbaseDocument X101.DEF XBRL Taxonomy Extension Definition LinkbaseDocument X101.LAB XBRL Taxonomy Extension Label Linkbase Document X101.PRE XBRL Taxonomy Extension Presentation LinkbaseDocument X# Indicates management contract or compensatory plan or arrangement.†Confidential treatment has been granted as to certain portions, which portions have been separately filed with the Securities and ExchangeCommission.123Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of Contents††Confidential treatment has been requested as to certain portions, which portions have been separately filed with the Securities and ExchangeCommission.124Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Table of ContentsITEM 16.FORM 10-K SUMMARYNone.SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. CURIS, INC. By: /S/ ALI FATTAEY Ali FattaeyPresident and Chief Executive OfficerDate: March 8, 2018Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date /s/ ALI FATTAEY President, Chief Executive Officer andDirector (Principal Executive Officer) March 8, 2018Ali Fattaey /s/ JAMES DENTZER Chief Financial and Administrative Officer(Principal Financial and Accounting Officer) March 8, 2018James Dentzer /s/ MARTYN D. GREENACRE Chairman of the Board of Directors March 8, 2018Martyn D. Greenacre /s/ KENNETH I. KAITIN Director March 8, 2018Kenneth I. Kaitin /s/ LORI A. KUNKEL Director March 8, 2018Lori A. Kunkel /s/ ROBERT MARTELL Director March 8, 2018Robert Martell /s/ MARC RUBIN Director March 8, 2018Marc Rubin 125Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.21CURIS, INC.Incentive Stock Option AgreementGranted Under Amended and Restated 2010 Stock Incentive Plan, as amendedThis Incentive Stock Option Agreement certifies that, pursuant to the Curis, Inc. Amended and Restated 2010 Stock Incentive Plan, asamended (the “Plan”), the Board has granted an option to purchase shares of Common Stock of Curis, Inc., as stated below.Capitalized terms used herein and not defined shall have the meanings ascribed to such terms in the Plan.Summary of Terms:Participant:[Employee Name]Participant’s address:[Employee Address]Tax Identification No.:[Employee Social Security #]Shares:____________ shares of Common StockPer Share Exercise Price:$______ per shareVesting Date:___________________________Grant Date:___________________________Expiration Date:___________________________Summary Vesting Schedule:See Section 2(a) for details.CURIS, INC. Date: ____________________By: _________________________[ ], Vice PresidentThe undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned herebyacknowledges receipt of a copy of the Company’s Amended and Restated 2010 Stock Incentive Plan, as amended.Date: _______________________________________________________________ [Employee Name and Address]Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Terms and Conditions of Incentive Stock Option Agreement1.Grant of Option.This agreement evidences the grant by Curis, Inc., a Delaware corporation (the “Company”), on , 201[ ] (the “GrantDate”) to [ ], an employee of the Company (the “Participant”), of an option to purchase, in whole or in part, on the termsprovided herein and in the Company’s Amended and Restated 2010 Stock Incentive Plan, as amended (the “Plan”), a total of[ ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”) at $[ ] perShare. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on [_______] (the “Final Exercise Date”).It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of theInternal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicatedby the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercisethis option validly under its terms.2.Vesting Schedule.This option will become exercisable (“vest”) as to ___% of the original number of Shares on the [___] anniversary of the GrantDate and as to an additional ___% of the original number of Shares at the end of each successive [____] period following the [____]anniversary of the Grant Date until the [____] anniversary of the Grant Date.The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extentpermissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of theFinal Exercise Date or the termination of this option under Section 3 hereof or the Plan.3.Exercise of Option.(a)Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received bythe Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. TheParticipant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for anyfractional share or for fewer than ten whole shares.(b)Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this optionmay not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the GrantDate, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company as defined inSection 424(e) or (f) of the Code (an “Eligible Participant”).(c)Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason,then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after suchcessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that theParticipant was entitled toSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date,violates the non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement orother agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon writtennotice to the Participant from the Company describing such violation.(d)Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning ofSection 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has notterminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of oneyear following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his orher death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.(e)Termination for Cause. If, prior to the Final Exercise Date, the Participant’s employment is terminated by theCompany for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of suchtermination of employment. If the Participant is party to an employment, consulting or severance agreement with the Company thatcontains a definition of “cause” for termination of employment or other relationship, “Cause” shall have the meaning ascribed to suchterm in such agreement. Otherwise, “Cause” shall mean any (i) willful failure by the Participant, which failure is not cured within 30days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company or (ii) willfulmisconduct by the Participant which affects the business reputation of the Company. The Participant’s employment shall be consideredto have been terminated for Cause if the Company determines, within 30 days after the Participant’s resignation, that termination forCause was warranted.4.Tax Matters.(a)Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays tothe Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required bylaw to be withheld in respect of this option.(b)Disqualifying Disposition. If the Participant disposes of Shares acquired upon exercise of this option within two yearsfrom the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify theCompany in writing of such disposition.5.Transfer Restrictions. This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant,either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of theParticipant, this option shall be exercisable only by the Participant.6.Provisions of the Plan. This option is subject to the provisions of the Plan (including the provisions relating to amendments tothe Plan), a copy of which is furnished to the Participant with this option.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.22CURIS, INC.Nonstatutory Stock Option AgreementGranted Under Amended and Restated 2010 Stock Incentive Plan, as amendedThis Nonstatutory Stock Option Agreement certifies that, pursuant to the Curis, Inc. Amended and Restated 2010 Stock IncentivePlan, as amended (the “Plan”), the Board has granted an option to purchase shares of Common Stock of Curis, Inc., as stated below.Capitalized terms used herein and not defined shall have the meanings ascribed to such terms in the Plan.Summary of Terms:Participant:[Employee Name]Circle One:Employee Consultant DirectorParticipant’s address:[Employee Address]Tax Identification No.:[Employee Social Security #]Shares:____________ shares of Common StockPer Share Exercise Price:$______ per shareVesting Date:___________________________Grant Date:___________________________Expiration Date:___________________________Summary Vesting Schedule:See Section 2(a) for details.CURIS, INC. Date: ____________________By: _________________________[ ], Vice PresidentThe undersigned hereby accepts the foregoing option and agrees to the terms and conditions thereof. The undersigned herebyacknowledges receipt of a copy of the Company’s Amended and Restated 2010 Stock Incentive Plan, as amended.Date: _______________________________________________________________ [Employee Name and Address]Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Terms and Conditions of Nonstatutory Stock Option Agreement1.Grant of Option.This agreement evidences the grant by Curis, Inc., a Delaware corporation (the “Company”), on , 201[ ] (the “GrantDate”) to [ ], an [employee], [consultant], [director] of the Company (the “Participant”), of an option to purchase, in wholeor in part, on the terms provided herein and in the Company’s Amended and Restated 2010 Stock Incentive Plan, as amended (the“Plan”), a total of [ ] shares (the “Shares”) of common stock, $0.01 par value per share, of the Company (“Common Stock”)at $[ ] per Share. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on [_______] (the “Final ExerciseDate”).It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of theInternal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicatedby the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercisethis option validly under its terms.2.Vesting Schedule.This option will become exercisable (“vest”) as to ___% of the original number of Shares on the [___] anniversary of the GrantDate and as to an additional ___% of the original number of Shares at the end of each successive [____] period following the [____]anniversary of the Grant Date until the [____] anniversary of the Grant Date.The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extentpermissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of theFinal Exercise Date or the termination of this option under Section 3 hereof or the Plan.3.Exercise of Option.(a)Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received bythe Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. TheParticipant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for anyfractional share.(b)Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this optionmay not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the GrantDate, an [employee, officer or director of], or consultant or advisor to, the Company or any other entity the employees, officers,directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).(c)Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason,then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after suchcessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that theParticipant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior tothe Final Exercise Date, violates the non-competition or confidentiality provisions of any employment contract, confidentiality andnondisclosure agreement or other agreement between the Participant and theSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Companydescribing such violation.(d)Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning ofSection 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has notterminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of oneyear following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his orher death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.(e)Termination for Cause. If, prior to the Final Exercise Date, the Participant’s employment or other relationship withthe Company is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediatelyupon the effective date of such termination of employment or other relationship. If the Participant is party to an employment, consultingor severance agreement with the Company that contains a definition of “cause” for termination of employment or other relationship,“Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean any (i) willful failure by theParticipant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or hermaterial responsibilities to the Company or (ii) willful misconduct by the Participant which affects the business reputation of theCompany. The Participant’s employment or other relationship shall be considered to have been terminated for “Cause” if the Companydetermines, within 30 days after the Participant’s resignation, that termination for Cause was warranted.4.Withholding.No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to the Company, or makesprovision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld inrespect of this option.5.Transfer Restrictions. This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant,either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of theParticipant, this option shall be exercisable only by the Participant.6.Provisions of the Plan. This option is subject to the provisions of the Plan (including the provisions relating to amendments tothe Plan), a copy of which is furnished to the Participant with this option.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.23CURIS, INC.[Form of Restricted Stock Agreement]Name of Recipient:_____________________Number of shares of restricted common stock awarded:_____________________Grant Date:_____________________Curis, Inc. (the “Company”) has selected you to receive the restricted stock award described above, which is subject to theprovisions of the Company’s Amended and Restated 2010 Stock Incentive Plan, as amended (the “Plan”) and the terms and conditionscontained in this Restricted Stock Agreement. Please confirm your acceptance of this restricted stock award and of the terms andconditions of this Agreement by signing a copy of this Agreement where indicated below.Curis, Inc.By:___________________________[insert name and title]Accepted and Agreed:__________________________[insert name of recipient]Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CURIS, INC.Restricted Stock AgreementThe terms and conditions of the award of shares of restricted common stock of the Company (the “Restricted Shares”) made tothe Recipient, as set forth on the cover page of this Agreement, are as follows:1.Issuance of Restricted Shares.(a)The Restricted Shares are issued to the Recipient, effective as of the Grant Date (as set forth on the coverpage of this Agreement), in consideration of employment services rendered and to be rendered by the Recipient to the Company.(b)The Restricted Shares will initially be issued by the Company in book entry form only, in the name of theRecipient. Following the vesting of any Restricted Shares pursuant to Section 2 below, the Company shall, if requested by theRecipient, issue and deliver to the Recipient a certificate representing the vested Restricted Shares. The Recipient agrees that theRestricted Shares shall be subject to the forfeiture provisions set forth in Section 3 of this Agreement and the restrictions on transfer setforth in Section 4 of this Agreement.2.Vesting.(a)Vesting Schedule. Unless otherwise provided in this Agreement or the Plan, the Restricted Shares shall vestin accordance with the following vesting schedule: _____________________________________________.3.Forfeiture of Unvested Restricted Shares Upon Employment Termination.In the event that the Recipient ceases to be employed by the Company for any reason or no reason, with or without cause, all ofthe Restricted Shares that are unvested as of the time of such employment termination shall be forfeited immediately and automaticallyto the Company, without the payment of any consideration to the Recipient, effective as of such termination of employment. TheRecipient shall have no further rights with respect to any Restricted Shares that are so forfeited. If the Recipient is employed by asubsidiary of the Company, any references in this Agreement to employment with the Company shall instead be deemed to refer toemployment with such subsidiary.4.Restrictions on Transfer.The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise(collectively “transfer”) any Restricted Shares, or any interest therein, until such Restricted Shares have vested, except that theRecipient may transfer such Restricted Shares: (a) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings,grandchildren and any other relatives approved by the Compensation Committee (collectively, “Approved Relatives”) or to a trustestablished solely for the benefit of the Recipient and/or Approved Relatives, provided that such Restricted Shares shall remain subjectto this Agreement (including without limitation the forfeitureSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.provisions set forth in Section 3 and the restrictions on transfer set forth in this Section 4) and such permitted transferee shall, as acondition to such transfer, deliver to the Company a written instrument confirming that such transferee shall be bound by all of theterms and conditions of this Agreement; or (b) as part of the sale of all or substantially all of the shares of capital stock of the Company(including pursuant to a merger or consolidation). The Company shall not be required (i) to transfer on its books any of the RestrictedShares which have been transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such RestrictedShares or to pay dividends to any transferee to whom such Restricted Shares have been transferred in violation of any of the provisionsof this Agreement.5.Restrictive Legends. The book entry account reflecting the issuance of the Restricted Shares in the name of the Recipient shall bear a legend orother notation upon substantially the following terms:“These shares of stock are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted StockAgreement between the corporation and the registered owner of these shares (or his or her predecessor in interest), and suchAgreement is available for inspection without charge at the office of the Secretary of the corporation.”6.Rights as a Shareholder.Except as otherwise provided in this Agreement, for so long as the Recipient is the registered owner of the Restricted Shares,the Recipient shall have all rights as a shareholder with respect to the Restricted Shares, whether vested or unvested, including, withoutlimitation, rights to vote the Restricted Shares and act in respect of the Restricted Shares at any meeting of shareholders; provided that,as provided in the Plan, the payment of dividends on unvested Restricted Shares shall be deferred until after such shares vest.7.Provisions of the Plan.This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Recipient with this Agreement.8.Tax Matters.(a)Acknowledgments; Section 83(b) Election. The Recipient acknowledges that he or she is responsible forobtaining the advice of the Recipient’s own tax advisors with respect to the acquisition of the Restricted Shares and the Recipient isrelying solely on such advisors and not on any statements or representations of the Company or any of its agents with respect to the taxconsequences relating to the Restricted Shares. The Recipient understands that the Recipient (and not the Company) shall beresponsible for the Recipient’s tax liability that may arise in connection with the acquisition, vesting and/or disposition of the RestrictedShares. The Recipient acknowledges that he or she has been informed of the availability of making an election under Section 83(b) ofthe Internal Revenue Code, as amended, with respect to the issuance of the Restricted Shares[ and that the Recipient has decided not tofile a Section 83(b) election.] [The Recipient agrees that he or she will deliver written notice to the Company if he or she files a Section83(b) election and he or she will provide for the tax withholding obligations that would apply if such an election is made.] Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(b)Withholding. The Recipient acknowledges and agrees that the Company has the right to deduct frompayments of any kind otherwise due to the Recipient any federal, state, local or other taxes of any kind required by law to be withheldwith respect to the vesting of the Restricted Shares. On each date on which Restricted Shares vest, the Company shall deliver writtennotice to the Recipient of the amount of withholding taxes due with respect to the vesting of the Restricted Shares that vest on suchdate; provided, however, that the total tax withholding cannot exceed the Company’s minimum statutory withholding obligations(based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to suchsupplemental taxable income). The Recipient shall satisfy such tax withholding obligations by making a cash payment to the Companyon the date of vesting of the Restricted Shares, in the amount of the Company’s withholding obligation in connection with the vestingof such Restricted Shares.9.Miscellaneous.(a)Authority of Committee. In making any decisions or taking any actions with respect to the matters covered bythis Agreement, the Committee (as defined in the Plan) shall have all of the authority and discretion, and shall be subject to all of theprotections, provided for in the Plan. All decisions and actions by the Committee with respect to this Agreement shall be made in theCommittee’s discretion and shall be final and binding on the Recipient.(b)No Right to Continued Employment. The Recipient acknowledges and agrees that, notwithstanding the factthat the vesting of the Restricted Shares is contingent upon his or her continued employment by the Company, this Agreement does notconstitute an express or implied promise of continued employment or confer upon the Recipient any rights with respect to continuedemployment by the Company.(c)Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internallaws of the State of Delaware without regard to any applicable conflicts of laws provisions.(d)Recipient’s Acknowledgments. The Recipient acknowledges that he or she has read this Agreement, hasreceived and read the Plan, and understands the terms and conditions of this Agreement and the Plan.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.27[Form of Incentive Stock Option Agreement]Notice of Grant of Stock Options and Option AgreementCuris, Inc.ID: 04-35051164 Maguire RoadLexington, MA 02421Name [LAST_NAME]Option Number:[OPTION_NUMBER][ADDRESS_LINE_1]Plan:[EQUITY_PLAN][CITY, STATE][ZIPCODE]ID:[EMPLOYEE_IDENTIFIER]Effective [OPTION_DATE,'MM/DD/YYYY'] (“Grant Date”), you have been granted a(n) Incentive Stock Option to buy a specified number of shares(“Shares”) of CURIS INC. (the “Company”) stock at specified price per share (“Exercise Price”). The details of your stock option grant are asfollows:Date of Grant[OPTION_DATE,’MM/DD/YYYY’]Vesting Commencement Date[VEST_BASE_DATE,'MM/DD/YYYY']Exercise Price Per Share[OPTION_PRICE,’$999,999,999.99]Total Number of Shares Granted[TOTAL_SHARES_GRANTED]Total Exercise Price[TOTAL_OPTION_PRICE,’$999,999,999.99’]Term/Expiration Date[EXPIRE_DATE_PERIOD1,’MM/DD/YYYY]Shares in each period will become fully vested on the dates shown below:SharesVest TypeFull Vest[SHARES_PERIOD1,'999,999,999'%]On Vest Date[VEST_DATE_PERIOD1,'MM/DD/YYYY'][SHARES_PERIOD2,'999,999,999'][Quarterly][VEST_DATE_PERIOD2,'MM/DD/YYYY']By clicking “Accept”, you and the Company agree that these options are granted under and governed by the terms and conditions of theCompany's Stock Option Plan, as amended, and the Incentive Stock Option Agreement, all of which are attached and made a part of thisdocument.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Terms and Conditions of Incentive Stock Option Agreement1.Grant of Option.This agreement evidences the grant by Curis, Inc., a Delaware corporation (the “Company”), on the Grant Date to theParticipant, an employee of the Company, of an option to purchase, in whole or in part, on the terms provided herein and in theCompany’s Second Amended and Restated 2010 Stock Incentive Plan (the “Plan”), the Shares of common stock, $0.01 par value pershare, of the Company (“Common Stock”) at the Per Share Exercise Price. Unless earlier terminated, this option shall expire at 5:00p.m., Eastern time, on the Expiration Date (the “Final Exercise Date”).It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of theInternal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicatedby the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercisethis option validly under its terms.2.Vesting Schedule.This option will become exercisable (“vest”) as to [ ]% of the original number of Shares on the first anniversary of the GrantDate and as to an additional [ ]% of the original number of Shares at the end of each successive quarterly period following the firstanniversary of the Grant Date until the fourth anniversary of the Grant Date.The right of exercise shall be cumulative so that to the extent the option is not exercised in any period to the maximum extentpermissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of theFinal Exercise Date or the termination of this option under Section 3 hereof or the Plan.Notwithstanding anything herein to the contrary, upon a termination or cessation of the status of the Participant as an EligibleParticipant (as defined below) due to the Participant’s death or disability, the option shall become fully vested and exercisable as of thedate of such death or disability. For purposes of this agreement, “disability” shall have the meaning set forth in Section 22(e)(3) of theCode.3.Exercise of Option.(a)Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received bythe Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. TheParticipant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for anyfractional share or for fewer than ten whole shares.(b)Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this optionmay not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the GrantDate, an employee or officer of, or consultant or advisor to, the Company or any parent or subsidiary of the Company as defined inSection 424(e) or (f) of the Code (an “Eligible Participant”)(c)Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason,then, except as provided in paragraphs (d) and (e) below, the right to exerciseSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.this option shall terminate three months after such cessation (but in no event after the Final Exercise Date), provided that this optionshall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation.Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the non-competition or confidentialityprovisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant andthe Company, the right to exercise this option shall terminate immediately upon written notice to the Participant from the Companydescribing such violation.(d)Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning ofSection 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has notterminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of oneyear following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his orher death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.(e)Termination for Cause. If, prior to the Final Exercise Date, the Participant’s employment is terminated by theCompany for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of suchtermination of employment. If the Participant is party to an employment, consulting or severance agreement with the Company thatcontains a definition of “cause” for termination of employment or other relationship, “Cause” shall have the meaning ascribed to suchterm in such agreement. Otherwise, “Cause” shall mean any (i) willful failure by the Participant, which failure is not cured within 30days of written notice to the Participant from the Company, to perform his or her material responsibilities to the Company or (ii) willfulmisconduct by the Participant which affects the business reputation of the Company. The Participant’s employment shall be consideredto have been terminated for Cause if the Company determines, within 30 days after the Participant’s resignation, that termination forCause was warranted.4.Tax Matters.(a)Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays tothe Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required bylaw to be withheld in respect of this option.(b)Disqualifying Disposition. If the Participant disposes of Shares acquired upon exercise of this option within two yearsfrom the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify theCompany in writing of such disposition.5.Transfer Restrictions. This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant,either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of theParticipant, this option shall be exercisable only by the Participant.6.Provisions of the Plan. This option is subject to the provisions of the Plan (including the provisions relating to amendments tothe Plan), a copy of which is furnished to the Participant with this option.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.28[Form of Nonstatutory Stock Option Agreement]Notice of Grant of Stock Options and Option AgreementCuris, Inc.ID: 04-35051164 Maguire RoadLexington, MA 02421[FIRST_NAME_LAST_NAME]Option Number:[OPTION_NUMBER[ADDRESS_LINE_1]Plan:[EQUITY_PLAN][CITY, STATE][ZIPCODE]ID:[EMPLOYEE_IDENTIFIER]Effective [OPTION_DATE,'MM/DD/YYYY] (“Grant Date”), you have been granted a(n) Non-Qualified Stock Option to buy a specified number ofshares (“Shares”) of CURIS INC. (the “Company”) stock at specified price per share (“Exercise Price”). The details of your stock option grant areas follows:Date of Grant[OPTION_DATE,’MM/DD/YYYY’]Vesting Commencement Date[VEST_BASE _DATE,'MM/DD/YYYY']Exercise Price Per Share[OPTION_PRICE,’$999,999,999.99’]Total Number of Shares Granted[TOTAL_SHARES_GRANTED]Total Exercise Price[TOTAL_OPTION_PRICE,’$999,999,999.99’]Term/Expiration Date[EXPIRE_DATE_PERIOD1,’MM/DD/YYYY’]Shares in each period will become fully vested on the dates shown below:SharesVest TypeFull Vest[SHARES_PERIOD1,'999,999,999']On Vest Date[VEST_DATE_PERIOD1,'MM/DD/YYYY'][SHARES_PERIOD2,'999,999,999'][Quarterly][VEST_DATE_PERIOD2,'MM/DD/YYYY'][By clicking “Accept”, you and the Company agree that these options are granted under and governed by the terms and conditions of theCompany's Stock Option Plan, as amended, and the Option Agreement all of which are attached and made a part of this document.][By your signature and the Company’s signature below, you and the Company agree that these options are granted under and governed by theterms and conditions of the Company’s Stock Option Plan, as amended, and the Option Agreement, all of which are attached and made a part ofthis document.] Curis, Inc. Date Name. DateSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Terms and Conditions of Nonstatutory Stock Option Agreement1.Grant of Option.This agreement evidences the grant by Curis, Inc., a Delaware corporation (the “Company”), on the Grant Date to theParticipant, an [employee], [consultant], [director], of the Company, of an option to purchase, in whole or in part, on the termsprovided herein and in the Company’s Second Amended and Restated 2010 Stock Incentive Plan (the “Plan”), the Shares of commonstock, $0.01 par value per share, of the Company (“Common Stock”) at the Per Share Exercise Price. Unless earlier terminated, thisoption shall expire at 5:00 p.m., Eastern time, on Expiration Date (the “Final Exercise Date”).It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of theInternal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”). Except as otherwise indicatedby the context, the term “Participant”, as used in this option, shall be deemed to include any person who acquires the right to exercisethis option validly under its terms.2.Vesting Schedule.This option will become exercisable (“vest”) as to [ ]% of the original number of Shares on the first anniversary of the GrantDate and as to an additional [ ]% of the original number of Shares at the end of each successive quarterly period following the firstanniversary of the Grant Date until the fourth anniversary of the Grant Date. The right of exercise shall be cumulative so that to theextent the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or inpart, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination of this option underSection 3 hereof or the Plan. Notwithstanding anything herein to the contrary, upon a termination or cessation of the status of theParticipant as an Eligible Participant (as defined below) due to the Participant’s death or disability, the option shall become fully vestedand exercisable as of the date of such death or disability. For purposes of this agreement, “disability” shall have the meaning set forth inSection 22(e)(3) of the Code.3.Exercise of Option.(a)Form of Exercise. Each election to exercise this option shall be in writing, signed by the Participant, and received bythe Company at its principal office, accompanied by this agreement, and payment in full in the manner provided in the Plan. TheParticipant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for anyfractional share.(b)Continuous Relationship with the Company Required. Except as otherwise provided in this Section 3, this optionmay not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the GrantDate, an employee, officer or director of, or consultant or advisor to, the Company or any other entity the employees, officers,directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “Eligible Participant”).(c)Termination of Relationship with the Company. If the Participant ceases to be an Eligible Participant for any reason,then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after suchcessation (but in no event after the Final Exercise Date), provided that this option shall be exercisable only to the extent that theParticipant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior tothe Final Exercise Date, violates the non-competition or confidentiality provisions of any employmentSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right toexercise this option shall terminate immediately upon written notice to the Participant from the Company describing such violation.(d)Exercise Period Upon Death or Disability. If the Participant dies or becomes disabled (within the meaning ofSection 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has notterminated such relationship for “cause” as specified in paragraph (e) below, this option shall be exercisable, within the period of oneyear following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),provided that this option shall be exercisable only to the extent that this option was exercisable by the Participant on the date of his orher death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.(e)Termination for Cause. If, prior to the Final Exercise Date, the Participant’s employment or other relationship withthe Company is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediatelyupon the effective date of such termination of employment or other relationship. If the Participant is party to an employment, consultingor severance agreement with the Company that contains a definition of “cause” for termination of employment or other relationship,“Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean any (i) willful failure by theParticipant, which failure is not cured within 30 days of written notice to the Participant from the Company, to perform his or hermaterial responsibilities to the Company or (ii) willful misconduct by the Participant which affects the business reputation of theCompany. The Participant’s employment or other relationship shall be considered to have been terminated for “Cause” if the Companydetermines, within 30 days after the Participant’s resignation, that termination for Cause was warranted.4.Withholding. No Shares will be issued pursuant to the exercise of this option unless and until the Participant pays to theCompany, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required bylaw to be withheld in respect of this option.5.Transfer Restrictions. This option may not be sold, assigned, transferred, pledged or otherwise encumbered by the Participant,either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of theParticipant, this option shall be exercisable only by the Participant.6.Provisions of the Plan. This option is subject to the provisions of the Plan (including the provisions relating to amendments tothe Plan), a copy of which is furnished to the Participant with this option.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.29CURIS, INC.[Form of Restricted Stock Agreement]Name of Recipient:_____________________Number of shares of restricted common stock awarded:_____________________Grant Date:_____________________Curis, Inc. (the “Company”) has selected you to receive the restricted stock award described above, which is subject to theprovisions of the Company’s Second Amended and Restated 2010 Stock Incentive Plan (the “Plan”) and the terms and conditionscontained in this Restricted Stock Agreement. Please confirm your acceptance of this restricted stock award and of the terms andconditions of this Agreement by signing a copy of this Agreement where indicated below.Curis, Inc.By:___________________________[insert name and title]Accepted and Agreed:__________________________[insert name of recipient]Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.CURIS, INC.Restricted Stock AgreementThe terms and conditions of the award of shares of restricted common stock of the Company (the “Restricted Shares”) made tothe Recipient, as set forth on the cover page of this Agreement, are as follows:1.Issuance of Restricted Shares.(a)The Restricted Shares are issued to the Recipient, effective as of the Grant Date (as set forth on the coverpage of this Agreement), in consideration of employment services rendered and to be rendered by the Recipient to the Company.(b)The Restricted Shares will initially be issued by the Company in book entry form only, in the name of theRecipient. Following the vesting of any Restricted Shares pursuant to Section 2 below, the Company shall, if requested by theRecipient, issue and deliver to the Recipient a certificate representing the vested Restricted Shares. The Recipient agrees that theRestricted Shares shall be subject to the forfeiture provisions set forth in Section 3 of this Agreement and the restrictions on transfer setforth in Section 4 of this Agreement.2.Vesting.(a)Vesting Schedule. Unless otherwise provided in this Agreement or the Plan, the Restricted Shares shall vestin accordance with the following vesting schedule: _____________________________________________.(b)Notwithstanding anything herein to the contrary, upon a termination or cessation of employment of theRecipient due to the Recipient’s death or disability, all Restricted Shares held by such Recipient that are unvested at the time of suchtermination shall automatically become fully vested and nonforfeitable. For purposes of this agreement, “disability” shall have themeaning set forth in Section 22(e)(3) of the Code.3.Forfeiture of Unvested Restricted Shares Upon Employment Termination.In the event that the Recipient ceases to be employed by the Company for any reason or no reason, with or without cause, all ofthe Restricted Shares that are unvested as of the time of such employment termination shall be forfeited immediately and automaticallyto the Company, without the payment of any consideration to the Recipient, effective as of such termination of employment. TheRecipient shall have no further rights with respect to any Restricted Shares that are so forfeited. If the Recipient is employed by asubsidiary of the Company, any references in this Agreement to employment with the Company shall instead be deemed to refer toemployment with such subsidiary.4.Restrictions on Transfer.The Recipient shall not sell, assign, transfer, pledge, hypothecate or otherwise dispose of, by operation of law or otherwise(collectively “transfer”) any Restricted Shares, or any interest therein, until such Restricted Shares have vested, except that theRecipient may transfer such Restricted Shares: (a) to or for the benefit of any spouse, children, parents, uncles, aunts, siblings,grandchildren and anySource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.other relatives approved by the Compensation Committee (collectively, “Approved Relatives”) or to a trust established solely for thebenefit of the Recipient and/or Approved Relatives, provided that such Restricted Shares shall remain subject to this Agreement(including without limitation the forfeiture provisions set forth in Section 3 and the restrictions on transfer set forth in this Section 4)and such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument confirming that suchtransferee shall be bound by all of the terms and conditions of this Agreement; or (b) as part of the sale of all or substantially all of theshares of capital stock of the Company (including pursuant to a merger or consolidation). The Company shall not be required (i) totransfer on its books any of the Restricted Shares which have been transferred in violation of any of the provisions of this Agreementor (ii) to treat as owner of such Restricted Shares or to pay dividends to any transferee to whom such Restricted Shares have beentransferred in violation of any of the provisions of this Agreement.5.Restrictive Legends. The book entry account reflecting the issuance of the Restricted Shares in the name of the Recipient shall bear a legend orother notation upon substantially the following terms:“These shares of stock are subject to forfeiture provisions and restrictions on transfer set forth in a certain Restricted StockAgreement between the corporation and the registered owner of these shares (or his or her predecessor in interest), and suchAgreement is available for inspection without charge at the office of the Secretary of the corporation.”6.Rights as a Shareholder.Except as otherwise provided in this Agreement, for so long as the Recipient is the registered owner of the Restricted Shares,the Recipient shall have all rights as a shareholder with respect to the Restricted Shares, whether vested or unvested, including, withoutlimitation, rights to vote the Restricted Shares and act in respect of the Restricted Shares at any meeting of shareholders; provided that,as provided in the Plan, the payment of dividends on unvested Restricted Shares shall be deferred until after such shares vest.7.Provisions of the Plan.This Agreement is subject to the provisions of the Plan, a copy of which is furnished to the Recipient with this Agreement.8.Tax Matters.(a)Acknowledgments; Section 83(b) Election. The Recipient acknowledges that he or she is responsible forobtaining the advice of the Recipient’s own tax advisors with respect to the acquisition of the Restricted Shares and the Recipient isrelying solely on such advisors and not on any statements or representations of the Company or any of its agents with respect to the taxconsequences relating to the Restricted Shares. The Recipient understands that the Recipient (and not the Company) shall beresponsible for the Recipient’s tax liability that may arise in connection with the acquisition, vesting and/or disposition of the RestrictedShares. The Recipient acknowledges that he or she has been informed of the availability of making an election under Section 83(b) ofthe Internal Revenue Code, as amended, with respect to the issuance of the Restricted Shares[ and that the Recipient has decided not tofile a Section 83(b) election.] [The Recipient agrees that he or she will deliver written notice to theSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Company if he or she files a Section 83(b) election and he or she will provide for the tax withholding obligations that would apply ifsuch an election is made.](b)Withholding. The Recipient acknowledges and agrees that the Company has the right to deduct frompayments of any kind otherwise due to the Recipient any federal, state, local or other taxes of any kind required by law to be withheldwith respect to the vesting of the Restricted Shares. On each date on which Restricted Shares vest, the Company shall deliver writtennotice to the Recipient of the amount of withholding taxes due with respect to the vesting of the Restricted Shares that vest on suchdate; provided, however, that the total tax withholding cannot exceed the Company’s minimum statutory withholding obligations(based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to suchsupplemental taxable income). The Recipient shall satisfy such tax withholding obligations by making a cash payment to the Companyon the date of vesting of the Restricted Shares, in the amount of the Company’s withholding obligation in connection with the vestingof such Restricted Shares.9.Miscellaneous.(a)Authority of Committee. In making any decisions or taking any actions with respect to the matters covered bythis Agreement, the Committee (as defined in the Plan) shall have all of the authority and discretion, and shall be subject to all of theprotections, provided for in the Plan. All decisions and actions by the Committee with respect to this Agreement shall be made in theCommittee’s discretion and shall be final and binding on the Recipient.(b)No Right to Continued Employment. The Recipient acknowledges and agrees that, notwithstanding the factthat the vesting of the Restricted Shares is contingent upon his or her continued employment by the Company, this Agreement does notconstitute an express or implied promise of continued employment or confer upon the Recipient any rights with respect to continuedemployment by the Company.(c)Governing Law. This Agreement shall be construed, interpreted and enforced in accordance with the internallaws of the State of Delaware without regard to any applicable conflicts of laws provisions.(d)Recipient’s Acknowledgments. The Recipient acknowledges that he or she has read this Agreement, hasreceived and read the Plan, and understands the terms and conditions of this Agreement and the Plan.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 10.31CURIS, INC.AMENDED AND RESTATED 2010 EMPLOYEE STOCK PURCHASE PLANThe following constitute the provisions of the Amended and Restated 2010 Employee Stock Purchase Plan of Curis, Inc.1.Purpose. The purpose of the Plan is to provide eligible employees of the Company and its Designated Subsidiarieswith opportunities to purchase shares of Common Stock through accumulated payroll deductions. It is the intention of the Company tohave the Plan qualify as an “employee stock purchase plan” under Section 423 of the Code and the regulations promulgatedthereunder. The provisions of the Plan, accordingly, shall be construed consistent therewith.2.Definitions.(a)“Acquisition Price” shall have the meaning given such term in Section 18(b)(2) of the Plan.(b)“Board” shall mean the Board of Directors of the Company.(c)“Code” shall mean the Internal Revenue Code of 1986, as amended.(d)“Committee” shall have the meaning given such term in Section 13 of the Plan.(e)“Common Stock” shall mean the common stock, par value $0.01, of the Company.(f)“Company” shall mean Curis, Inc.(g)“Compensation” shall mean the amount of money reportable on the employee’s Federal Income Tax WithholdingStatement, excluding overtime, shift premium, incentive or bonus awards, allowances and reimbursements for expensessuch as relocation allowances for travel expenses, income or gains associated with the grant or vesting of restrictedstock, income or gains on the exercise of Company stock options or stock appreciation rights, and similar items,whether or not shown on the employee’s Federal Income Tax Withholding Statement, but including, in the case ofsalespersons, sales commissions to the extent determined by the Board.(h)“Designated Subsidiaries” shall mean the Subsidiaries which have been designated by the Board from time to time in itssole discretion as eligible to participate in the Plan.(i)“Enrollment Date” shall mean the first day of each Offering Period.(j)“Exercise Date” shall mean the last day of each Purchase Period.(k)“Fair Market Value” shall mean, as of any date, (a) the closing price (for the primary trading session) on any nationalsecurities exchange on which the Common Stock is listed, (b) the closing price of the Common Stock on the NasdaqNational Market or (c) the average of the closing bid and asked prices in the over-the-counter-market, whichever isapplicable, as published in The Wall Street Journal. If no sales of Common Stock were made on such a day, the price ofthe Common Stock for purposes of clause (a), (b) and (c) above shall be the reported price for the next preceding dayon which sales were made.(l)“Offering Period” shall mean the period of approximately twenty-four (24) months during which an option grantedpursuant to the Plan may be exercised, commencing on the first Trading Day on or after June 15 and December 15 ofeach year and terminating on the last Trading Day in the period ending twenty-four (24) months later. The duration andtiming of an Offering Period may be changed pursuant to Section 4 of this Plan.(m)“Option Shares” shall have the meaning given such term in Section 7 of the Plan.(n)“Participant” shall have the meaning given such term in Section 5(a) of the Plan.(o)“Plan” shall mean this Amended and Restated 2010 Employee Stock Purchase Plan.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.(p)“Purchase Period” shall mean the period commencing the day after an Exercise Date and ending on the Trading Dayclosest to the day that is six (6) months after the preceding Exercise Date, except that the first Purchase Period of anyOffering Period shall commence on the Enrollment Date and end with the Trading Day that is six (6) months after theEnrollment Date. The duration and timing of Purchase Periods may be changed pursuant to Section 4 of the Plan.(q)“Purchase Price” shall mean, unless the Board determines otherwise, an amount equal to 85% of the Fair Market Valueof a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.(r)“Reorganization Event” shall have the meaning given such term in Section 18(b)(i) of the Plan.(s)“Subsidiary” shall mean any present or future subsidiary corporation as defined in Section 424(f) of the Code.(t)“Trading Day” shall mean a day on which national stock exchanges and the Nasdaq System are open for trading.3.Eligibility.(a)All employees of the Company, including directors who are employees, and all employees of any DesignatedSubsidiary are eligible to participate in any one or more of the offerings to purchase Common Stock under the Planprovided that:(i)they are customarily employed by the Company or a Designated Subsidiary for more than 20 hours a week andfor more than five months in a calendar year; and(ii)they have been employed by the Company or a Designated Subsidiary for at least six months prior to enrollingin the Plan; and(iii)they are employees of the Company or a Designated Subsidiary on the on a given Enrollment Date.(b)Any provisions of the Plan to the contrary notwithstanding, no employee shall be granted an option under the Plan (i) tothe extent that, immediately after the grant, such employee (or any other person whose stock would be attributed to suchemployee pursuant to Section 424(d) of the Code) would own capital stock of the Company or of any Subsidiaryand/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combinedvoting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent thathis or her rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries accruesat a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Valueof the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time.In the event that an employee may not be granted an option under the Plan because of the foregoing restrictions, theemployee shall be granted an option to purchase the maximum number of shares that would not violate the foregoingrestrictions.(c)The Company retains the discretion to determine which eligible employees may participate in an offering pursuant toand consistent with Treasury Regulation Sections 1.423-2(e) and (f).4.Offering Periods. The Plan shall be implemented by consecutive, overlapping Offering Periods with a new OfferingPeriod commencing on the first Trading Day on or after June 15 and December 15 each year, or on such other date as the Board shalldetermine, and continuing thereafter until terminated in accordance with Section 19 hereof. The Board shall have the power to changethe durationSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.of Offering Periods and Purchase Periods (including the commencement dates thereof) with respect to future offerings withoutstockholder approval.5.Participation.(a)An eligible employee may become a participant in the Plan (a “Participant”) by completing a payroll deductionauthorization form in the form designated by the Company from time to time and filing it at least fifteen (15) days priorto the applicable Enrollment Date with the Company’s payroll office or such other office as the Company may direct.(b)The payroll deduction authorization form will authorize a regular payroll deduction from the Compensation received bythe employee during the Offering Period. Payroll deductions for a Participant shall commence on the first payrollfollowing the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization isapplicable, unless sooner terminated by the Participant as provided in Section 10 hereof.6.Payroll Deductions.(a)At the time a Participant files his or her payroll deduction authorization form, he or she shall elect to have payrolldeductions made on each pay day during the Offering Period in an amount not exceeding fifteen percent (15%) of theCompensation which he or she receives on each pay day during the Offering Period. Such payroll deductions shall bein whole percentages only. The Board may, at its discretion, designate a lower maximum contribution rate. Payrolldeductions may be at a rate of between 1% and 15% of Compensation with any change in Compensation during theOffering Period to result in an automatic corresponding change in the dollar amount withheld. The minimum payrolldeduction is such percentage of Compensation as may be established from time to time by the Board.(b)All payroll deductions made for a Participant shall be credited to his or her account under the Plan. A Participant maynot make any additional payments into such account.(c)A Participant may increase, decrease or discontinue his or her payroll deduction during any Offering Period, by filing anew payroll deduction authorization form. The Board may, in its discretion, limit the number of participation ratechanges during any Offering Period. If a Participant elects to discontinue payroll deductions during an Offering Period,but does not elect to withdraw his or her funds pursuant to Section 10, funds deducted prior to such election todiscontinue will be applied to the purchase of Common Stock on the next occurring Exercise Date. A Participant’spayroll deduction authorization form shall remain in effect for successive Offering Periods unless terminated asprovided in Section 10 hereof.(d)At the time the option (as described in Section 7) is exercised, in whole or in part, or at the time any of the CommonStock issued under the Plan is disposed of, the Participant must make adequate provision for the Company’s federal,state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of theCommon Stock. At any time, the Company may, but shall not be obligated to, withhold from the Participant’scompensation the amount necessary for the Company to meet applicable withholding obligations, including anywithholding required to make available to the Company any tax deductions or benefits attributable to sale or otherdisposition of Common Stock by the Participant.7.Grant of Option.(a)On the Enrollment Date of each Offering Period, each eligible employee participating in such Offering Period shall begranted an option to purchase (at the applicable PurchaseSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Price) up to a whole number of shares of the Common Stock the (“Option Shares”) determined by dividing $50,000 bythe Fair Market Value of a share of Common Stock on the Enrollment Date (subject to any adjustment pursuant toSection 18), and provided that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof.The option shall be exercisable as to 25% of the Option Shares on each Exercise Date during the Offering Period.Exercise of the option shall occur as provided in Section 8 hereof, unless the Participant has withdrawn pursuant toSection 10 hereof. The option shall expire on the last day of the Offering Period following the purchase of sharespursuant to Section 8.(b)To the extent permitted by any applicable laws, regulations, or rules of the established stock exchange, national marketsystem, or over-the-counter market on which the Common Stock trades, if the Fair Market Value of the Common Stockon the Enrollment Date of the next Offering Period is lower than the Fair Market Value of the Common Stock on theEnrollment Date of any current Offering Period, then all Participants in such current Offering Period shall beautomatically withdrawn from such Offering Period immediately after the exercise of their option on the Exercise Dateand shall be automatically re-enrolled in the next Offering Period as of the first day thereof.8.Exercise of Option.(a)Unless a Participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase ofshares shall be exercised automatically on each Exercise Date during the Offering Period, and a number of full sharesnot exceeding the number of shares as to which such Participant’s option is exercisable on such Exercise Date shall bepurchased for such Participant at the applicable Purchase Price with the accumulated payroll deductions in his or heraccount. No fractional shares shall be purchased. Any balance remaining in a Participant’s payroll deduction account atthe end of a Purchase Period will be automatically refunded to the Participant, except that any balance which is lessthan the purchase price of one share of Common Stock will be carried forward into the Participant’s payroll deductionaccount for the following Purchase Period or Offering Period, unless the employee elects not to participate in the nextPurchase Period or Offering Period, in which case the balance in the employee’s account shall be refunded. During aParticipant’s lifetime, a Participant’s option to purchase shares hereunder is exercisable only by him or her.9.Delivery. Certificates representing shares of Common Stock purchased under the Plan may be issued only in the nameof the Participant, in the name of the Participant and another person of legal age as joint tenants with rights of survivorship, or (in theCompany’s sole discretion) in the name of a brokerage firm, bank, or other nominee holder designated by the Participant. TheCompany may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of shares inlieu of issuing certificates.10.Withdrawal; Termination of Employment.(a)A Participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yetused to exercise his or her option under the Plan at any time by giving written notice to the Company in the formdesignated by the Company. All of the Participant’s payroll deductions credited to his or her account shall be paid tosuch Participant promptly after receipt of notice of withdrawal and such Participant’s option for the Offering Periodshall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for suchOffering Period. If a Participant withdrawsSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unlessthe Participant delivers to the Company a new payroll deduction authorization form.(b)Upon a Participant’s ceasing to be an employee, for any reason, he or she shall be deemed to have elected to withdrawfrom the Plan and the payroll deductions credited to such Participant’s account during the Offering Period but not yetused to exercise the option shall be returned to such Participant or, in the case of his or her death, to the person orpersons entitled thereto under Section 14 hereof, and such Participant’s option shall be automatically terminated. If,prior to the last day of the Offering Period, the Designated Subsidiary by which the employee is employed shall ceaseto be a Subsidiary of the Company, or if the employee is transferred to a Subsidiary of the Company that is not aDesignated Subsidiary, the employee shall be deemed to have terminated employment for purposes of this Plan.(c)A Participant’s withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate inany similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods.11.Interest. Interest will not be paid on any Participant accounts, except to the extent that the Board, in its solediscretion, elects to credit employee accounts with interest at such rate as it may from time to time determine.12.Stock.(a)The maximum number of shares of the Common Stock which shall be made available for sale under the Plan shall be10,000,000 shares, subject to adjustment as provided in Section 18(a) hereof. If, on a given Exercise Date, the numberof shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan,the Company shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner asshall be practicable and as it shall determine to be equitable.(b)The Participant shall have no interest or voting right in shares covered by his or her option until such option has beenexercised and then only with respect to the Option Shares actually purchased for the account of the Participant.13.Administration.(a)The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board (a“Committee”). The Board or its Committee has authority to make rules and regulations for the administration of thePlan and its interpretation and decisions with regard thereto shall be final and conclusive. Any reference to the authorityof the Committee to act under this Plan shall be contingent upon the Board having delegated such authority to theCommittee. All references to the Board contained herein shall also refer to its Committee, as applicable.(b)Without stockholder consent and without regard to whether any Participant rights may be considered to have been“adversely affected,” the Board shall be entitled to change the Offering Periods and Purchase Periods, limit thefrequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratioapplicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of theamount designated by a Participant in order to adjust for delays or mistakes in the Company’s processing of properlycompleted withholding elections, establish reasonable waiting and adjustment periods and/or accounting and creditingprocedures toSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.ensure that amounts applied toward the purchase of Common Stock for each Participant properly correspond withamounts withheld from the Participant’s Compensation and establish such other limitations or procedures as the Boarddetermines in its sole discretion advisable which are consistent with the Plan.14.Designation of Beneficiary.(a)A Participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from theParticipant’s account under the Plan in the event of such Participant’s death subsequent to an Exercise Date on whichthe option is exercised but prior to delivery to such Participant of such shares and cash. In addition, a Participant mayfile a written designation of a beneficiary who is to receive any cash from the Participant’s account under the Plan in theevent of such Participant’s death prior to exercise of the option. If a Participant is married and the designated beneficiaryis not the spouse, spousal consent shall be required for such designation to be effective.(b)Such designation of beneficiary may be changed by the Participant at any time by written notice. In the event of thedeath of a Participant and in the absence of a beneficiary validly designated under the Plan who is living at the time ofsuch Participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estateof the Participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), theCompany, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents orrelatives of the Participant, or if no spouse, dependent or relative is known to the Company, then to such other person asthe Company may designate.15.Transferability. Neither payroll deductions credited to a Participant’s account nor any rights with regard to theexercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way(other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the Participant. Any such attempt atassignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election towithdraw funds from an Offering Period in accordance with Section 10 hereof.16.Use of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Companyfor any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.17.Reports. Individual accounts shall be maintained for each Participant in the Plan in the form and on the basisdetermined by the Company.18.Adjustments for Changes in Common Stock and Certain Other Events.(a)Changes in Capitalization. In the event of any stock split, reverse stock split, stock dividend, recapitalization,combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, ordistribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securitiesavailable under this Plan, (ii) the share limitations set forth in Sections 3 and 7, and (iii) the Purchase Price shall beequitably adjusted to the extent determined by the Board.(b)Reorganization Events.(i)Definition. A “Reorganization Event” shall mean: (A) any merger or consolidation of the Company with or intoanother entity as a result of which all of the Common Stock of the Company is converted into or exchanged forthe right to receive cash,Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.securities or other property or is cancelled, (B) any transfer or disposition of all of the Common Stock for cash,securities or other property pursuant to a share exchange or other transaction or (C) any liquidation ordissolution of the Company.(ii)Consequences of a Reorganization Event on Options. In connection with a Reorganization Event, the Boardmay take any one or more of the following actions as to outstanding options on such terms as the Boarddetermines: (A) provide that options shall be assumed, or substantially equivalent options shall be substituted, bythe acquiring or succeeding corporation (or an affiliate thereof), (B) upon written notice to Participants, providethat all outstanding options will be terminated immediately prior to the consummation of such ReorganizationEvent and that all such outstanding options will become exercisable to the extent of accumulated payrolldeductions as of a date specified by the Board in such notice, which date shall not be less than ten (10) dayspreceding the effective date of the Reorganization Event, (C) upon written notice to Participants, provide that alloutstanding options will be cancelled as of a date prior to the effective date of the Reorganization Event and thatall accumulated payroll deductions will be returned to participating employees on such date, (D) in the event ofa Reorganization Event under the terms of which holders of Common Stock will receive upon consummationthereof a cash payment for each share surrendered in the Reorganization Event (the “Acquisition Price”),change the last day of the Offering Period to be the date of the consummation of the Reorganization Event andmake or provide for a cash payment to each employee equal to (1) (i) the Acquisition Price times (ii) the numberof shares of Common Stock that the Participant’s accumulated payroll deductions as of immediately prior to theReorganization Event could purchase at the Purchase Price, where the Acquisition Price is treated as the fairmarket value of the Common Stock on the last day of the applicable Plan Period for purposes of determining thePurchase Price under Section 2(r) hereof, and where the number of shares that could be purchased is subject tothe limitations set forth in Sections 3 and 7, minus (2) the result of multiplying such number of shares by suchPurchase Price, (E) provide that, in connection with a liquidation or dissolution of the Company, options shallconvert into the right to receive liquidation proceeds (net of the Purchase Price thereof) and (vi) anycombination of the foregoing.(iii)For purposes of clause (b)(ii)(A) above, an option shall be considered assumed if, following consummation ofthe Reorganization Event, the replacement option confers the right to purchase, for each share of CommonStock subject to the option immediately prior to the consummation of the Reorganization Event, theconsideration (whether cash, securities or other property) received as a result of the Reorganization Event byholders of Common Stock for each share of Common Stock held immediately prior to the consummation of theReorganization Event (and if holders were offered a choice of consideration, the type of consideration chosenby the holders of a majority of the outstanding shares of Common Stock); provided, however, that if theconsideration received as a result of the Reorganization Event is not solely common stock of the acquiring orsucceeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring orsucceeding corporation, provide for the consideration to be received upon the exercise of options to consistsolely of such number of shares of common stock of the acquiring or succeeding corporation (or an affiliatethereof) that the Board determines to be equivalent in value (as of the date of such determination orSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.another date specified by the Board) to the per share consideration received by holders of outstanding shares ofCommon Stock as a result of the Reorganization Event. 19.Amendment or Termination. The Board may at any time, and from time to time, amend or suspend this Planor any portion thereof, except that (i) if the approval of any such amendment by the shareholders of the Company is required bySection 423 of the Code, such amendment shall not be effected without such approval, and (ii) in no event may anyamendment be made which would cause the Plan to fail to comply with Section 423 of the Code. This Plan may be terminatedat any time by the Board. Upon termination of the Plan all amounts in the accounts of Participants shall be promptly refunded.20.Notices. All notices or other communications by a Participant to the Company under or in connection withthe Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or bythe person, designated by the Company for the receipt thereof.21.Conditions Upon Issuance of Shares. Shares shall not be issued with respect to an option unless the exerciseof such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law,domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon whichthe shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to suchcompliance. As a condition to the exercise of an option, the Company may require the person exercising such option torepresent and warrant at the time of any such exercise that the shares are being purchased only for investment and without anypresent intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is requiredby any of the aforementioned applicable provisions of law.22.Effective Date. The Plan shall become effective upon, and the first Offering Period hereunder shall begin on,June 15, 2017, subject to the Plan’s earlier adoption by the Board and approval by the shareholders of the Company as requiredby Section 423 of the Code.23.Governmental Regulations. The Company’s obligation to sell and deliver Common Stock under this Plan issubject to listing on an established stock exchange or quotation on a national market system or an over the counter market (tothe extent the Common Stock is then so listed or quoted) and the approval of all governmental authorities required inconnection with the authorization, issuance, or sale of such stock.24.Governing Law. The Plan shall be governed by the laws of the Commonwealth of Massachusetts except tothe extent that such law is preempted by federal law.25.Source of Shares. Shares may be issued upon exercise of an option from authorized but unissued CommonStock, from shares held in the treasury of the Company, or from any other proper source.26.Notification Upon Sale of Shares. Each employee agrees, by participating in the Plan, to promptly give noticeto the Company of any disposition of shares purchased under the Plan where such disposition occurs within two years after theEnrollment Date with respect to theSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.option pursuant to which such shares were purchased or within one year of the date of exercise of such option pursuant towhich such shares were purchased.27.Grants to Employees in Foreign Jurisdictions. The Company may, to comply with the laws of a foreignjurisdiction, grant options to employees of the Company or a Designated Subsidiary who are citizens or residents of suchforeign jurisdiction (without regard to whether they are also citizens of the United States or resident aliens (within the meaningof Section 7701(b)(1)(A) of the Code)) with terms that are less favorable (but not more favorable) than the terms of optionsgranted under the Plan to employees of the Company or a Designated Subsidiary who are resident in the United States.Notwithstanding the preceding provisions of this Plan, employees of the Company or a Designated Subsidiary who are citizensor residents of a foreign jurisdiction (without regard to whether they are also citizens of the United States or resident aliens(within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from eligibility under the Plan if (a) the grant ofan option under the Plan to a citizen or resident of the foreign jurisdiction is prohibited under the laws of such jurisdiction or (b)compliance with the laws of the foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of theCode. The Company may add one or more appendices to this Plan describing the operation of the Plan in those foreignjurisdictions in which employees are excluded from participation or granted less favorable options.28.Authorization of Sub-Plans. The Board may from time to time establish one or more sub-plans under the Planwith respect to one or more Designated Subsidiaries, provided that such sub-plan complies with Section 423 of the Code. Adopted by the Board of Directors on April 6, 2010 Approved by the stockholders on June 3, 2010Amended and Restated by the Board ofDirectors on March 27, 2017Approved by the stockholders on May 16,2017Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.AMENDMENT NO. 1 TOCURIS, INC.AMENDED AND RESTATED 2010 EMPLOYEE STOCK PURCHASE PLANThis Amendment No. 1 (the “Amendment”) is made to the Amended and Restated 2010 Employee Stock Purchase Plan (the“ESPP”) of Curis, Inc. (the “Company”), which was adopted by the Board of Directors of the Company on March 27, 2017 andapproved by its stockholders on May 16, 2017.1.Section 3(b) of the ESPP is amended and restated in its entirety to read as follows:Any provisions of the Plan to the contrary notwithstanding, no employee shall be granted an option under the Plan to the extent that,immediately after the grant, such employee (or any other person whose stock would be attributed to such employee pursuant toSection 424(d) of the Code) would own capital stock of the Company or of any Subsidiary and/or hold outstanding options to purchasesuch stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of theCompany or of any Subsidiary. In the event that an employee may not be granted an option under the Plan because of the foregoingrestriction, the employee shall be granted an option to purchase the maximum number of shares that would not violate the foregoingrestriction.2.Section 7(a) of the ESPP is amended and restated in its entirety to read as follows:On the Enrollment Date of each Offering Period, each eligible employee participating in such Offering Period shall be granted an optionto purchase (at the applicable Purchase Price) up to a whole number of shares of the Common Stock the (“Option Shares”) determinedby dividing $100,000 by the Fair Market Value of a share of Common Stock on the Enrollment Date (subject to any adjustmentpursuant to Section 18), provided that such purchase shall be subject to the limitation set forth in Section 12 hereof. The option shall beexercisable as to 25% of the Option Shares on each Exercise Date during the Offering Period. Any provisions of the Plan to the contrarynotwithstanding, subject to Section 423(b)(8) of the Code, no eligible employee will be permitted to purchase stock under all employeestock purchase plans of the Company and its Subsidiaries at a rate that exceeds Twenty-Five Thousand Dollars ($25,000) worth ofstock (determined at the Fair Market Value of the shares at the time the option is granted) for each calendar year in which any optiongranted to the eligible employee under such an employee stock purchase plan is outstanding at any time. Exercise of the option shalloccur as provided in Section 8 hereof, unless the Participant has withdrawn pursuant to Section 10 hereof. The option shall expire onthe last day of the Offering Period following the purchase of shares pursuant to Section 8.Except as herein provided, all other terms and conditions of the ESPP remain unchanged and in full force and effect. Capitalizedterms used herein and not otherwise defined herein shall have the respective meanings assigned to them in the ESPP.This Amendment was adopted by the Board of Directors of the Company on December 12, 2017.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 14CURIS, INC.AMENDED AND RESTATEDCODE OF BUSINESS CONDUCT AND ETHICSAdopted: December 12, 2017This Code of Business Conduct and Ethics (the “Code”) sets forth legal and ethical standards of conduct for directors, officersand employees of Curis, Inc. (the “Company”). This Code is intended to deter wrongdoing and to promote the conduct of all Companybusiness in accordance with high standards of integrity and in compliance with all applicable laws and regulations. Except as otherwiserequired by applicable local law, this Code applies to the Company and all of its subsidiaries and other business entities controlled by itworldwide.If you have any questions regarding this Code or its application to you in any situation, you should contact your supervisor orthe General Counsel or the Chairman of the Board of Directors of the Company.Compliance with Laws, Rules and RegulationsThe Company requires that all employees, officers and directors comply with all laws, rules and regulations applicable to theCompany wherever it does business. You are expected to use good judgment and common sense in seeking to comply with allapplicable laws, rules and regulations and to ask for advice when you are uncertain about them.If you become aware of the violation of any law, rule or regulation by the Company, whether by its officers, employees,directors, or any third party doing business on behalf of the Company, it is your responsibility to promptly report the matter to yoursupervisor or to the General Counsel or the Chairman of the Board of Directors. While it is the Company’s desire to address mattersinternally, nothing in this Code prohibits you from reporting any illegal activity, including any violation of the securities laws, antitrustlaws, environmental laws or any other federal, state or foreign law, rule or regulation, to the appropriate regulatory authority.Employees, officers and directors shall not discharge, demote, suspend, threaten, harass or in any other manner discriminate or retaliateagainst an employee because he or she reports any such violation. However, if the report was made with knowledge that it was false,the Company may take appropriate disciplinary action up to and including termination. This Code should not be construed to prohibityou from engaging in concerted activity protected by the rules and regulations of the National Labor Relations Board or fromtestifying, participating or otherwise assisting in any state or federal administrative, judicial or legislative proceeding or investigation.Compliance with Company PoliciesEvery employee, officer and director is expected to comply with all Company policies and rules as may be in effect from timeto time. You are expected to familiarize yourself with such policies.Conflicts of InterestEmployees, officers, and directors must refrain from engaging in any activity or having a personal interest that presents a“conflict of interest” and should seek to avoid even the appearance of a conflict ofSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.interest. A conflict of interest occurs when your personal interest interferes with the business interests of the Company. A conflict ofinterest can arise whenever you, as an officer, director or employee, take action or have an interest that prevents you from performingyour Company duties and responsibilities honestly, objectively and effectively.For example:•No employee, officer or director shall perform services as a consultant, employee, officer, director, advisor or in any othercapacity for, or have a financial interest in, a direct competitor of the Company, other than services performed at the requestof the Company and other than a financial interest representing less than one percent (1%) of the outstanding shares of apublicly-held company; and•No employee, officer or director shall use his or her position with the Company to influence a transaction with a supplier orcustomer in which such person has any personal interest, other than a financial interest representing less than one percent(1%) of the outstanding shares of a publicly-held company.It is your responsibility as an employee, officer or director to disclose any material transaction or relationship that reasonablycould be expected to give rise to a conflict of interest to the General Counsel or to the Chairman of the Board of Directors, who shallbe responsible for determining whether such transaction or relationship constitutes a conflict of interest. Executive officers and directorsshall disclose any material transaction or relationship that reasonably could be expected to give rise to a conflict of interest to the Boardof Directors, who shall be responsible for determining whether such transaction or relationship constitutes a conflict of interest.Insider TradingEmployees, officers and directors who have material non-public information about the Company or other companies, includingour suppliers and customers, as a result of their relationship with the Company are prohibited by law and Company policy from tradingin securities of the Company or such other companies, as well as from communicating such information to others who might trade onthe basis of that information. To help ensure that you do not engage in prohibited insider trading and avoid even the appearance of animproper transaction, the Company has adopted an Insider Trading Policy, which is available in the “Curis Policies” section of theCompany’s Intranet (http://webint).If you are uncertain about the constraints on your purchase or sale of any Company securities or the securities of any othercompany that you are familiar with by virtue of your relationship with the Company, you should consult with the General Counselbefore making any such purchase or sale.ConfidentialityAll information and know-how, whether or not in writing, of a private, secret or confidential nature concerning the Company’sbusiness or financial affairs (collectively, “Proprietary Information”) is and shall be the exclusive property of the Company. By way ofillustration, but not limitation, Proprietary Information may include discoveries, inventions, product candidates, products, productimprovements, product enhancements, processes, methods, techniques, formulas, compositions, compounds, negotiation strategies andpositions, projects, developments, plans (including business and marketing plans), research data, clinical data, financial data, computerprograms (including software used pursuant to a license agreement), customer, vendor, and supplier lists, and contacts at or knowledgeof customers or vendors of the Company.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Employees, officers and directors must maintain the confidentiality of Proprietary Information entrusted to them by theCompany or other companies, including our suppliers and customers, except when disclosure is authorized by a supervisor or legallypermitted in connection with reporting illegal activity to the appropriate regulatory authority. Unauthorized disclosure of anyProprietary Information is prohibited. Additionally, employees should take appropriate precautions to ensure that confidential orsensitive business information, whether it is proprietary to the Company or another company, is not communicated within theCompany except to employees who have a need to know such information to perform their responsibilities for the Company.Third parties may ask you for information concerning the Company. Subject to the exceptions noted in the precedingparagraph, employees, officers and directors (other than the Company’s authorized spokespersons) must not discuss ProprietaryInformation with, or disseminate Proprietary Information to, anyone outside the Company, except as required in the performance oftheir Company duties and, if appropriate, after a confidentiality agreement is in place. This prohibition applies particularly to inquiriesconcerning the Company from the media, market professionals (such as securities analysts, institutional investors, investment advisers,brokers and dealers) and security holders. All responses to inquiries on behalf of the Company must be made only by the Company’sauthorized spokespersons. If you receive any inquiries of this nature, you must decline to comment and refer the inquirer to yoursupervisor or one of the Company’s authorized spokespersons. The Company’s policies with respect to public disclosure of internalmatters are described more fully in the Company’s Disclosure Policy, which is available in the “Curis Policies” section of theCompany’s Intranet (http://webint).You also must abide by any lawful obligations that you have to your former employer. These obligations may includerestrictions on the use and disclosure of Proprietary Information, restrictions on the solicitation of former colleagues to work at theCompany and non-competition obligations.Honest and Ethical Conduct and Fair DealingEmployees, officers and directors should endeavor to deal honestly, ethically and fairly with the Company’s suppliers,customers, competitors and employees. Statements regarding the Company’s products and services must not be untrue, misleading,deceptive or fraudulent. You must not take unfair advantage of anyone through manipulation, concealment, abuse of privilegedinformation, misrepresentation of material facts or any other unfair-dealing practice.Protection and Proper Use of Corporate AssetsEmployees, officers and directors should seek to protect the Company’s assets, including Proprietary Information. Theft,carelessness and waste have a direct impact on the Company’s financial performance. Employees, officers and directors must use theCompany’s assets and services solely for legitimate business purposes of the Company and not for any personal benefit or the personalbenefit of anyone else.Employees, officers and directors must advance the Company’s legitimate interests when the opportunity to do so arises. Youmust not take for yourself personal opportunities that are discovered through your position with the Company or the use of property orinformation of the Company.Gifts and GratuitiesIt is the Company’s policy that you and members of your immediate family may not accept or give gifts if such gifts wouldinfluence or appear to influence business decisions or judgments by anyone doingSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.business with the Company. Gifts in excess of $250 should be reviewed with the Company’s General Counsel or the Chairman of theBoard of Directors.The use of Company funds or assets for gifts, gratuities or other favors to government officials is prohibited, except to theextent such gifts, gratuities or other favors are in compliance with applicable law, insignificant in amount and not given inconsideration or expectation of any action by the recipient. The use of Company funds or assets for gifts to any customer, supplier orother person doing or seeking to do business with the Company is prohibited, except to the extent such gifts are in compliance with thepolicies of both the Company and the recipient and are in compliance with applicable law.Employees, officers and directors must not accept, or permit any member of his or her immediate family to accept, any gifts,gratuities or other favors from any customer, supplier or other person doing or seeking to do business with the Company, other thanitems of insignificant value. Any gifts that are not of insignificant value should be returned immediately and reported to yoursupervisor. If immediate return is not practical, they should be given to the Company for charitable disposition or such other dispositionas the Company, in its sole discretion, believes appropriate.Common sense and moderation should prevail in business entertainment engaged in on behalf of the Company. Employees,officers and directors should provide, or accept, business entertainment to or from anyone doing business with the Company only if theentertainment is infrequent, modest, intended to serve legitimate business goals and in compliance with applicable law.Bribes and kickbacks are criminal acts that are strictly prohibited by law. You must not offer, give, solicit or receive any formof bribe or kickback anywhere in the world. The Foreign Corrupt Practices Act prohibits giving anything of value, directly orindirectly, to officials of foreign governments or foreign political candidates in order to obtain or retain business.Accuracy of Books and Records and Public ReportsEmployees, officers and directors must honestly and accurately report all business transactions. You are responsible for theaccuracy of your records and reports. Accurate information is essential to the Company’s ability to meet legal and regulatoryobligations.All Company books, records and accounts shall be maintained in accordance with all applicable regulations and standards andaccurately reflect the true nature of the transactions they record. The financial statements of the Company shall conform to generallyaccepted accounting rules and the Company’s accounting policies. No undisclosed or unrecorded account or fund shall be establishedfor any purpose. No false or misleading entries shall be made in the Company’s books or records for any reason, and no disbursementof corporate funds or other corporate property shall be made without adequate supporting documentation.It is the policy of the Company to provide full, fair, accurate, timely and understandable disclosure in reports and documentsfiled with, or submitted to, the Securities and Exchange Commission and in other public communications.Concerns Regarding Accounting or Auditing MattersEmployees with concerns regarding questionable accounting or auditing matters or complaints regarding accounting, internalaccounting controls or auditing matters may confidentially, and anonymously if they wish, submit such concerns or complaints inwriting to the Company’s General Counsel or the Chairman of the Board of Directors at the address listed below. See “Reporting andCompliance Procedures.” All suchSource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.concerns and complaints will be forwarded to the Audit Committee of the Board of Directors, unless they are determined to be withoutmerit by the General Counsel and Chief Financial Officer of the Company. In any event, a record of all complaints and concernsreceived will be provided to the Audit Committee each fiscal quarter. Any such concerns or complaints may also be communicated,confidentially and, if you desire, anonymously through our toll-free hotline at (866) 388-3115 or via email at CRIS@openboard.info.For more information, please visit https://www.openboard.info/cris/index.cfm. All messages will be transcribed by a third party andsent directly to the Chairman of the Audit Committee of the Board of Directors.The Audit Committee will evaluate the merits of any concerns or complaints received by it and authorize such follow-upactions, if any, as it deems necessary or appropriate to address the substance of the concern or complaint.The Company will not discipline, discriminate against or retaliate against any employee who reports a complaint or concern,unless it is determined that the report was made with knowledge that it was false.Dealings with Independent AuditorsNo employee, officer or director shall, directly or indirectly, make or cause to be made a materially false or misleadingstatement to an accountant in connection with (or omit to state, or cause another person to omit to state, any material fact necessary inorder to make statements made, in light of the circumstances under which such statements were made, not misleading to, an accountantin connection with) any audit, review or examination of the Company’s financial statements or the preparation or filing of anydocument or report with the SEC. No employee, officer or director shall, directly or indirectly, take any action to coerce, manipulate,mislead or fraudulently influence any independent public or certified public accountant engaged in the performance of an audit orreview of the Company’s financial statements.Waivers of this Code of Business Conduct and EthicsWhile some of the policies contained in this Code must be strictly adhered to and no exceptions can be allowed, in other casesexceptions may be appropriate. Any employee or officer who believes that a waiver of any of these policies is appropriate in his or hercase should first contact his or her immediate supervisor. If the supervisor agrees that a waiver is appropriate, the supervisor shalldiscuss the matter with the General Counsel and the General Counsel shall notify the Chairman of the Board of Directors. Theapproval of the Board of Directors must be obtained for any waiver of this Code. The General Counsel shall be responsible formaintaining a record of all requests by employees or officers for waivers of any of these policies and the disposition of such requests.Any executive officer or director who seeks a waiver of any of these policies should contact the General Counsel. Any waiverof this Code for executive officers or directors or any change to this Code that applies to executive officers or directors may be madeonly by the Board of Directors of the Company and will be disclosed as required by law or NASDAQ regulation.Reporting and Compliance ProceduresEvery employee, officer and director has the responsibility to ask questions, seek guidance, report suspected violations andexpress concerns regarding compliance with this Code to his or her supervisor or to the General Counsel, as described below. Anyemployee, officer or director who knows or believes that any other employee or representative of the Company has engaged or isengaging in Company-related conduct that violates applicable law or this Code should report such information to his or her supervisoror to the General Counsel or the Chairman of the Board, as described below. You may report such conduct openlySource: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.or anonymously without fear of retaliation. The Company will not discipline, discriminate against or retaliate against any employeewho reports such conduct, unless it is determined that the report was made with knowledge that it was false, or who cooperates in anyinvestigation or inquiry regarding such conduct. Any supervisor who receives a report of a violation of this Code must immediatelyinform the General Counsel.You may report violations of this Code, on a confidential or anonymous basis, by contacting the Company’s General Counselor the Chairman of the Board of Directors by mail, fax or e-mail at: Curis, Inc., 4 Maguire Road, Lexington, MA 02421; facsimile(617) 503-6501; info@curis.com. While we prefer that you identify yourself when reporting violations so that we may follow up withyou, as necessary, for additional information, you may leave messages anonymously if you wish through our toll-free hotline at (866)388-3115 or via email at CRIS@openboard.info. For more information, please visit https://www.openboard.info/cris/index.cfm. Allmessages will be transcribed by a third party and sent directly to the Chairman of the Audit Committee of the Board of Directors.If the General Counsel receives information regarding an alleged violation of this Code, he or she shall, as appropriate,(a) evaluate such information, (b) if the alleged violation involves an executive officer or a director, inform the Chief Executive Officerand Board of Directors of the alleged violation, (c) determine whether it is necessary to conduct an informal inquiry or a formalinvestigation and, if so, initiate such inquiry or investigation and (d) report the results of any such inquiry or investigation, together witha recommendation as to disposition of the matter, to the Chief Executive Officer and Board of Directors for action, or if the allegedviolation involves an executive officer or a director, report the results of any such inquiry or investigation to the Board of Directors or acommittee thereof. Employees, officers and directors are expected to cooperate fully with any inquiry or investigation by the Companyregarding an alleged violation of this Code. Failure to cooperate with any such inquiry or investigation may result in disciplinaryaction, up to and including discharge.The Company shall determine whether violations of this Code have occurred and, if so, shall determine the disciplinarymeasures to be taken against any employee who has violated this Code. In the event that the alleged violation involves an executiveofficer or a director, the Chief Executive Officer and the Board of Directors, respectively, shall determine whether a violation of thisCode has occurred and, if so, shall determine the disciplinary measures to be taken against such executive officer or director.Failure to comply with the standards outlined in this Code will result in disciplinary action including, but not limited to,reprimands, warnings, probation or suspension without pay, demotions, reductions in salary, discharge and restitution. Certainviolations of this Code may require the Company to refer the matter to the appropriate governmental or regulatory authorities forinvestigation or prosecution. Moreover, any supervisor who directs or approves of any conduct in violation of this Code, or who hasknowledge of such conduct and does not immediately report it, also will be subject to disciplinary action, up to and includingdischarge.Dissemination and AmendmentThis Code shall be distributed to each new employee, officer and director of the Company upon commencement of his or heremployment or other relationship with the Company and shall also be distributed annually to each employee, officer and director of theCompany, and each employee, officer and director shall certify that he or she has received, read and understood the Code and hascomplied with its terms.The Company reserves the right to amend, alter or terminate this Code at any time for any reason. The most current version ofthis Code can be found in the “Curis Policies” section of the Company’s Intranet (http://webint).Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.This document is not an employment contract between the Company and any of its employees, officers or directors.CertificationI, ______________________________ do hereby certify that:(Print Name Above)1. I have received and carefully read the Code of Business Conduct and Ethics of Curis, Inc.2. I understand the Code of Business Conduct and Ethics.3. I have complied and will continue to comply with the terms of the Code of Business Conduct and Ethics.4. Except as noted below, I do not know or believe that any employee or representative of the Company has engaged or isengaging in Company-related conduct that violates applicable law or the Code of Business Conduct and Ethics.Exceptions (describe, or state “None”):______________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________Date: __________________________ __________________________________(Signature)EACH EMPLOYEE, OFFICER AND DIRECTOR IS REQUIRED TO SIGN, DATE AND RETURN THISCERTIFICATION TO THE LEGAL DEPARTMENT WITHIN SEVEN (7) DAYS OF ISSUANCE. FAILURE TO DOSO MAY RESULT IN DISCIPLINARY ACTION.SUSPECTED VIOLATIONS SHOULD BE REPORTED TO(866) 388-3115Any such concerns or complaints may also be communicated, confidentially and, if you desire, anonymously through our toll-freehotline at (866) 388-3115 or via email at CRIS@openboard.info. These communications will be received by the Chairman of theAudit Committee of the Board of Directors.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 21SUBSIDIARIES OF THE REGISTRANT SUBSIDIARY NAME JURISDICTION OF ORGANIZATION DOING BUSINESS AS Curis Securities CorporationMassachusettsCuris Securities CorporationCuris Royalty LLCDelawareCuris Royalty LLC Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (File Nos. 333-214899, 333-205460, 333-203480,333-108570, 333-115832, and 333-145675) and on Form S-8 (File Nos. 333-222259, 333-218632, 333-215453, 333-206323, 333-191074, 333-157543,333-42596, 333-141175, 333-149720 and 333-167675) of Curis, Inc. of our report dated March 8, 2018 relating to the financial statements and theeffectiveness of internal control over financial reporting, which appears in this Form 10-K. /s/ PRICEWATERHOUSECOOPERS LLPBoston, MassachusettsMarch 8, 2018Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.1CERTIFICATION OF CHIEF EXECUTIVE PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACTI, Ali Fattaey, certify that: 1.I have reviewed this Annual Report on Form 10-K of Curis, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date:March 8, 2018/S/ ALI FATTAEY Ali Fattaey President and Chief Executive Officer (Principal Executive Officer)Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 31.2CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACTI, James E. Dentzer, certify that: 1.I have reviewed this Annual Report on Form 10-K of Curis, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designedunder our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements for external purposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; andd)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Date:March 8, 2018/S/ JAMES E. DENTZER James Dentzer Chief Financial and Administrative Officer (Principal Financial and Accounting Officer)Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.1CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(b) OF THE EXCHANGE ACT AND 18 U.S.C. SECTION1350In connection with the Annual Report on Form 10-K of Curis, Inc. (the “Company”) for the period ended December 31, 2017 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), the undersigned, Ali Fattaey, President and Chief Executive Officer of the Company, herebycertifies, pursuant to 18 U.S.C. Section 1350, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date:March 8, 2018/S/ ALI FATTAEY Ali Fattaey President and Chief Executive Officer (Principal Executive Officer)Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.EXHIBIT 32.2CERTIFICATION OF THE CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b) OF THE EXCHANGE ACT AND 18 U.S.C. SECTION1350In connection with the Annual Report on Form 10-K of Curis, Inc. (the “Company”) for the period ended December 31, 2017 as filed with the Securitiesand Exchange Commission on the date hereof (the “Report”), the undersigned, James E. Dentzer, Chief Financial and Administrative Officer of the Company,hereby certifies, pursuant to 18 U.S.C. Section 1350, that:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany.Date:March 8, 2018/S/ JAMES E. DENTZER James Dentzer Chief Financial and Administrative Officer (Principal Financial and Accounting Officer)Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.Source: CURIS INC, 10-K, March 08, 2018Powered by Morningstar® Document Research℠The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this information,except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.

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