Kiora Pharmaceuticals, Inc. — Q1 2023 Form 10-Q Summary
Business Context and Reporting Period
Kiora is a clinical-stage specialty pharmaceutical company developing ophthalmic therapies. The filing covers the three months ended March 31, 2023, and was filed May 9, 2023. The company has not generated significant revenue and is developing KIO-301 for retinal degenerative diseases, KIO-101 for ocular inflammation associated with rheumatoid arthritis, and KIO-201 for corneal epithelial defects and potential post-surgical applications.
- KIO-301: Phase 1b trial initiated in Q3 2022; FDA orphan drug designation was granted in March 2022.
- KIO-101: Phase 2 trial initiated in Q1 2023 and enrolling patients.
- KIO-201: Phase 2 trial completed, with results expected to be presented in Q2 2023; a potential Phase 3b PRK study was being planned for before year-end 2023.
Financial Performance and Position
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | None reported | None reported | Not applicable |
| General and administrative expense | $1.27 million | $1.66 million | Down $0.40 million |
| Research and development expense | $0.44 million | $0.71 million | Down $0.27 million |
| Executive severance | None | $0.96 million | Down $0.96 million |
| Total operating expenses | $1.92 million | $3.57 million | Down $1.65 million |
| Net loss | $1.87 million | $3.57 million | Improved by $1.70 million |
| Net loss per share | $1.00 | $11.27 | Improved; per-share amounts reflect the reverse split |
| Net cash used in operating activities | $3.07 million | $2.83 million | Use increased $0.24 million |
Cash and cash equivalents were $3.43 million at March 31, 2023, including $4,185 of restricted cash, compared with $6.01 million of total cash and restricted cash at December 31, 2022. Total assets were $16.53 million and total liabilities were $6.37 million. Contingent consideration liabilities totaled $3.84 million, including $3.53 million classified as non-current. The company had no reported debt financing.
Net cash provided by financing activities was $0.51 million, consisting of approximately $0.12 million from a private placement, $0.10 million from the equity line of credit, and $0.30 million from warrant exercises. The company reported an accumulated deficit of $136.3 million and has incurred losses and negative operating cash flows since inception.
Material Changes Versus the Prior Comparable Period
- Net loss declined primarily because Q1 2022 included $0.96 million of executive severance expense.
- General and administrative expense declined due to lower stock compensation and benefits, professional fees, and facilities costs following closure of the Waltham office.
- Research and development expense decreased primarily because of higher expected refundable Australian and Austrian research tax incentives, partly offset by increased KIO-301 clinical-trial costs.
- Interest and other income increased by approximately $43,700, principally from higher interest income and foreign-currency gains.
- Common shares outstanding increased to 1,919,270 at March 31, 2023 from 1,796,472 at December 31, 2022, reflecting equity issuances, warrant exercises, and equity-line activity.
- Potential dilution remained significant: warrants, options, restricted stock, preferred stock, and other reserved shares totaled approximately 1.95 million potential common shares excluded from diluted loss per share.
Guidance, Outlook, Risks, Contingencies, and Unusual Items
Management stated that cash on hand at March 31, 2023 was expected to fund planned operations into July 2023, although the timing could change with the pace of cash outflows. Management concluded that substantial doubt existed regarding the company’s ability to continue as a going concern. Additional capital is expected to be required through equity or debt financing, licensing agreements, collaborations, or grants. The company had access to an equity purchase agreement with Lincoln Park for up to $10.0 million, subject to limitations, but no assurance was given that sufficient financing would be available on acceptable terms.
- In April 2023, the company sold an additional 105,000 shares to Lincoln Park for approximately $0.3 million. As of May 5, 2023, total sales under the purchase agreement were 125,000 shares for aggregate gross proceeds of approximately $442,310.
- The company expects operating losses and expenses to increase as clinical development, regulatory activities, and potential commercialization efforts continue.
- Failure to obtain financing could require the company to delay, reduce, or terminate development or commercialization activities.
- Clinical, regulatory, market acceptance, intellectual-property, partnership, personnel, and competitive risks remain material. The filing states that COVID-19 had not materially adversely affected operations as of the filing date, but future effects remained uncertain.
- Contingent consideration fair value increased to $3.84 million from $3.63 million at December 31, 2022. The change was primarily driven by a decreased discount rate.
- The company reported no material changes to the risk factors in its 2022 Form 10-K and no current legal proceedings.
- Disclosure controls and procedures were not effective as of March 31, 2023 because of previously identified material weaknesses. Remediation efforts, including new accounting software, approval workflows, and enhanced controls over unusual transactions and commitments, were ongoing and not yet considered complete.
Important Facts for Investors to Verify
- Whether the company successfully accessed additional capital before or shortly after its projected July 2023 cash runway expiration.
- The terms, dilution, and remaining availability of the Lincoln Park equity purchase agreement and other equity-linked instruments.
- Progress, enrollment, safety, and efficacy results for the KIO-101 Phase 2 and KIO-301 Phase 1b programs.
- Results from the KIO-201 Phase 2 program and the timing and financing requirements for any planned Phase 3b study.
- Whether management remediated the disclosed material weaknesses in internal control over financial reporting.
- The assumptions and potential cash obligations underlying the $3.84 million contingent consideration liability.
- The company’s ability to generate revenue, obtain regulatory approvals, and achieve profitability, none of which had occurred as of March 31, 2023.