Kura Oncology, Inc. — Q2 2020 Form 10-Q Summary
Business context and reporting period
Kura Oncology is a clinical-stage biopharmaceutical company developing precision oncology medicines. Its principal clinical programs were tipifarnib, including registration-directed development in HRAS-mutant head and neck squamous cell carcinoma, and KO-539, a menin-KMT2A inhibitor in a Phase 1/2A trial for relapsed or refractory acute myeloid leukemia. The filing covers the three and six months ended June 30, 2020; financial statements are unaudited.
Financial condition and key metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Research and development expense | $13.7 million | $26.3 million |
| General and administrative expense | $7.5 million | $15.1 million |
| Total operating expenses | $21.2 million | $41.4 million |
| Net loss | $20.5 million | $39.7 million |
| Net loss per share | $0.40 | $0.82 |
| Net cash used in operating activities | Not separately reported | $34.6 million |
- The company generated no product-sales revenue and had no approved products. Other income was $0.7 million for the quarter and $1.7 million for the six months, primarily interest income.
- Cash, cash equivalents and short-term investments totaled $338.9 million at June 30, 2020, including $134.8 million of cash and cash equivalents and $204.1 million of short-term investments. Restricted cash was $0.2 million.
- Total assets were $353.0 million and stockholders’ equity was $322.4 million at June 30, 2020.
- Total debt was $7.5 million, consisting of $1.8 million current and $5.8 million long-term debt. The company could draw up to an additional $12.5 million under its Silicon Valley Bank facility through November 30, 2020.
- Management stated that existing cash, cash equivalents and short-term investments were expected to fund operating and capital requirements into 2023, based on current plans.
- The company had an accumulated deficit of $252.6 million and expects continuing operating losses and a need for substantial additional financing.
Material changes versus the prior comparable period
- Second-quarter research and development expense increased $2.3 million, or approximately 20%, from $11.4 million to $13.7 million. The increase primarily reflected higher tipifarnib development costs and personnel and other expenses.
- Second-quarter general and administrative expense increased $3.0 million, or approximately 68%, from $4.5 million to $7.5 million, driven by higher professional and legal fees, pre-commercial planning, share-based compensation and personnel costs.
- Six-month operating expenses increased $10.5 million, or approximately 34%, from $30.8 million to $41.4 million. The six-month net loss increased $10.8 million, from $28.9 million to $39.7 million.
- Net cash used in operating activities increased $5.9 million to $34.6 million for the six months, reflecting higher operating expenses and net loss.
- In May 2020, Kura issued 10.465 million shares at $13.75 per share and received approximately $134.9 million in net proceeds. Shares outstanding increased to 56.214 million at June 30, 2020, from 45.384 million at December 31, 2019.
- Short-term investments declined modestly to $204.1 million from $210.8 million at year-end, while cash and cash equivalents increased to $134.8 million from $26.1 million.
- The company terminated its KO-947 ERK inhibitor program and suspended planned tipifarnib studies in T-cell lymphoma and pancreatic cancer following a strategic review announced May 4, 2020.
Guidance, outlook, risks and unusual items
- COVID-19 slowed patient screening and enrollment at some clinical sites and was expected to continue causing trial and milestone delays. Following a July 6, 2020 protocol amendment, the AIM-HN trial permitted patients with any HRAS mutation, increasing the required number of evaluable patients; management could not reasonably forecast full enrollment timing.
- Updated RUN-HN data reported in May 2020 showed, among 18 evaluable patients with recurrent or metastatic HRAS-mutant HNSCC, median overall survival of 15.4 months, median progression-free survival of 5.9 months and an objective response rate of 50%. These results were from an earlier study and may not predict AIM-HN results.
- Kura expected research and development and general and administrative expenses to increase as it continued tipifarnib and KO-539 development activities.
- The company has an at-the-market facility allowing up to $75.0 million of common-stock sales, but had not sold shares under that facility as of the filing.
- Term loans bear interest at the greater of 5.50% or prime plus 0.25%, mature May 1, 2023 and are secured by substantially all company assets other than intellectual property. They include covenants and potential prepayment and final-payment obligations.
- Key risks include clinical-trial failure or delay, COVID-19 disruption, patient-enrollment challenges for genetically defined cancers, safety and efficacy uncertainty, regulatory approval and companion-diagnostic requirements, reliance on third-party manufacturers and CROs, intellectual-property limitations, competition and the need for additional capital.
- The filing reported no material legal proceedings and no off-balance-sheet arrangements. Disclosure controls and procedures were reported effective as of June 30, 2020.
Most important facts for investors to verify
- Whether AIM-HN enrollment delays and the broader HRAS-mutant eligibility criteria change the trial’s timing, size, statistical power or regulatory pathway.
- Whether tipifarnib and KO-539 produce confirmatory efficacy and acceptable safety results in later-stage or registrational development.
- The sustainability of the stated cash runway into 2023 given operating cash burn, trial expansion, COVID-19 impacts and potential commercialization spending.
- Future financing requirements, including use of the $75.0 million ATM facility, additional debt draws and resulting dilution or restrictive covenants.
- Availability and regulatory approval of companion diagnostics and clinical supplies from third-party providers.
- Progress toward the planned KO-539 recommended Phase 2 dose and potential enrichment in NPM1-mutant and KMT2A-rearranged AML populations.