Kymera Therapeutics, Inc. — Q3 2020 Form 10-Q
Business context and reporting period. This unaudited quarterly report covers the three and nine months ended September 30, 2020. Kymera is a clinical-stage biopharmaceutical company developing targeted protein degraders using its Pegasus platform. Its IRAK4, IRAKIMiD and STAT3 programs remained preclinical; it had no approved products or drug-sales revenue. The company completed its IPO in August 2020.
Financial performance and position
Amounts below are in millions of dollars, except per-share data.
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Collaboration revenue | $14.5 | $1.0 | $21.2 | $1.1 |
| Research and development expense | $15.8 | $11.3 | $41.7 | $26.1 |
| General and administrative expense | $6.8 | $1.5 | $13.1 | $5.5 |
| Operating loss | $(8.1) | $(11.9) | $(33.5) | $(30.4) |
| Net loss | $(8.0) | $(11.4) | $(32.9) | $(29.7) |
| Net loss per share, basic and diluted | $(0.39) | $(6.54) | $(5.11) | $(18.15) |
- Revenue came from collaboration arrangements, not product sales. Q3 2020 revenue comprised $10.9 million from Sanofi and $3.6 million from Vertex.
- No product gross margin was reported; product sales had not begun, so product margins are not meaningful.
- At September 30, 2020, cash and cash equivalents were $54.6 million and marketable securities totaled $426.7 million, for $481.3 million combined. Total current assets were $297.4 million and current liabilities $107.3 million. Total assets were $507.4 million; total liabilities were $212.7 million.
- Deferred revenue was $182.3 million, reflecting unearned collaboration consideration. Lease liabilities included $17.1 million of operating lease liabilities and $1.4 million of finance lease liabilities; the filing reports no conventional borrowing balance.
- For the first nine months, operating activities provided $108.2 million, investing activities used $418.6 million and financing activities provided $289.0 million. Operating cash flow was substantially supported by the $150.0 million Sanofi upfront payment and a $129.3 million increase in deferred revenue; it should not be read as recurring operating cash generation. Cash, cash equivalents and restricted cash decreased $21.4 million.
Material changes versus prior comparable periods
- Q3 collaboration revenue increased $13.6 million year over year, primarily reflecting the Sanofi agreement signed in July 2020 and higher Vertex revenue. Nine-month revenue rose $20.1 million.
- Q3 R&D expense increased $4.5 million; nine-month R&D increased $15.6 million, driven by IRAK program IND-enabling work, STAT3 lead optimization, platform and exploratory investment, increased headcount and the move to a new facility.
- Q3 G&A expense increased $5.3 million and nine-month G&A increased $7.6 million, largely from legal and professional fees, staffing and costs of operating as a public company.
- Q3 net loss narrowed to $8.0 million from $11.4 million, while nine-month net loss widened to $32.9 million from $29.7 million. The nine-month 2020 loss attributable to common stockholders was $42.0 million after a $9.1 million deemed dividend associated with a preferred-stock exchange.
- The August IPO generated approximately $199.8 million gross proceeds; a concurrent private placement to Vertex generated approximately $13.5 million gross proceeds. Preferred stock converted to common stock in connection with the IPO.
Outlook, commentary and risks
- Management expected to submit an IND for KT-474 in the first half of 2021, with a Phase 1 trial planned thereafter if cleared. IND submissions for IRAKIMiD and STAT3 candidates were expected in the second half of 2021, subject to development and regulatory progress.
- Management stated that cash, cash equivalents and marketable securities were expected to fund operations and capital expenditures into 2025, while cautioning that the estimate depended on assumptions and resources could be exhausted sooner. The financial statements separately state that resources were sufficient for at least twelve months from issuance.
- The Sanofi collaboration provided a $150.0 million upfront payment and potential development milestones of up to $1.48 billion, commercial milestones of up to $700 million, and tiered royalties. These contingent payments are not assured. Sanofi handles later development, manufacturing and commercialization after specified milestones; Kymera retains target-specific U.S. opt-in rights.
- Key risks include the unproven nature of the protein-degradation platform, preclinical-stage programs and uncertain safety, efficacy and regulatory outcomes; need for substantial future funding; reliance on collaborators, CROs and limited suppliers; intellectual-property risks; and possible COVID-19 disruption to research, supply and planned clinical timelines. The company cited a minor delay from a Wuhan-based API starting-material vendor.
- There were no material legal proceedings reported. Management said disclosure controls were effective at the reasonable-assurance level and reported no material change in internal control over financial reporting during the quarter.
Most important facts for investors to verify
- Whether KT-474 and the other programs met the stated IND and clinical-start timelines, and whether subsequent data supported safety and efficacy.
- How quickly deferred collaboration revenue is recognized and how much future cash generation depends on new milestones, collaborations or financing.
- Whether the stated funding runway into 2025 remains achievable as R&D, public-company and facility costs rise.
- Sanofi and Vertex collaboration progress, including target-specific responsibilities, options, termination provisions and contingent payments.
- Effects of dilution, equity compensation and potential future capital raises on outstanding shares and shareholder value.