Nkarta, Inc. — Q3 2020 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2020. Nkarta is a clinical-stage biopharmaceutical company developing engineered, off-the-shelf natural killer cell therapies, including NKX101 and NKX019. It had no approved products and generated no product revenue.
Financial position and performance
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0.115 million |
| Research and development expense | $9.8 million | $4.6 million | $25.0 million | $10.5 million |
| General and administrative expense | $3.9 million | $1.3 million | $8.6 million | $3.3 million |
| Net loss | $13.7 million | $2.7 million | $73.5 million | $10.6 million |
| Basic and diluted loss per share | $0.44 | $1.75 | $6.39 | $7.45 |
| Cash used in operating activities | Not separately presented | Not separately presented | $30.7 million | $11.7 million |
At September 30, 2020, cash and cash equivalents were $188.6 million and short-term investments were $141.2 million; restricted cash was $0.4 million. Together, these totaled $330.2 million. Total assets were $352.3 million, total liabilities $17.3 million, and stockholders’ equity $335.0 million. The company reported no debt at period-end; operating lease liabilities were $9.1 million, with further lease commitments, including space not yet commenced.
Changes and unusual items
- Operating expenses increased substantially year over year as research, staffing, facilities, and public-company costs grew. Q3 operating expenses rose $7.8 million to $13.7 million.
- Nine-month net loss included a $40.2 million noncash expense from remeasuring the Series B preferred-stock purchase-right liability. The liability was reclassified to equity when the preferred shares were issued in July; it did not represent comparable operating cash outflow.
- In July, Nkarta raised approximately $265.1 million net in its IPO and $64.4 million gross from the second tranche of its Series B preferred financing. IPO proceeds were reported as not yet used as of September 30 and were invested in cash equivalents and marketable securities.
- All outstanding preferred stock converted into common stock at the IPO. Common shares outstanding were 32.6 million at September 30; the company reported 3.6 million outstanding options excluded from diluted loss per share as anti-dilutive.
- Investing cash outflow was $131.4 million, principally reflecting purchases of short-term investments and $6.4 million of property and equipment purchases, including manufacturing-facility construction. Financing cash inflow was $330.1 million.
Outlook, risks, and contingencies
Management expected available cash, cash equivalents, restricted cash, and short-term investments to fund operations for at least 12 months from the filing date. Nkarta nevertheless expects substantial continuing losses and rising R&D expenses, and says additional funding will be needed for its development strategy. No revenue or earnings guidance was provided.
On November 12, 2020, the company announced that the first patient had been treated in its Phase 1 NKX101 study for relapsed/refractory AML or higher-risk MDS. The study is designed to assess safety, pharmacokinetics, and preliminary anti-tumor activity and to identify a recommended Phase 2 dose.
Key risks include clinical and regulatory uncertainty, manufacturing development and qualification, future financing needs and potential dilution, reliance on third-party vendors, and possible COVID-19-related disruption or delay to research and clinical trials. The company reported vendor disruptions and precautionary workplace measures; the pandemic’s ultimate effect remained uncertain. It reported no material pending legal proceedings and no material change to previously disclosed risk factors. Management stated disclosure controls were effective at a reasonable assurance level.
Important facts for investors to verify
- Whether the NKX101 trial progresses on schedule and what safety and efficacy data emerge; also track NKX019 development.
- Cash burn, investment balances, and whether management’s stated runway remains adequate as clinical and manufacturing spending rises.
- Future financing plans and potential dilution from equity awards and other securities.
- Manufacturing-facility construction, qualification, and the timing and cost of the additional leased space.
- Whether COVID-19, vendors, regulators, or trial enrollment affect development timelines.