Nkarta, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. Filed May 11, 2023. Nkarta is a clinical-stage biopharmaceutical company developing engineered, off-the-shelf natural killer (NK) cell therapies. Its lead candidates, NKX101 and NKX019, were in Phase 1 trials. The company had no approved products and had not generated product-sales revenue.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Product-sales revenue | None | None |
| Research and development expense | $26.1 million | $19.6 million |
| General and administrative expense | $8.2 million | $6.5 million |
| Total operating expenses / operating loss | $34.3 million | $26.1 million |
| Interest income | $3.5 million | $0.1 million |
| Net loss | $30.8 million | $26.0 million |
| Net loss per share, basic and diluted | $0.63 | $0.79 |
| Net cash used in operating activities | $20.8 million | $18.3 million |
Margins are not meaningful because the company reported no product revenue. Research and development costs rose mainly with increased NKX101 and NKX019 clinical activity, headcount, and internal research costs. Higher interest income partly offset the increase in operating expenses.
At March 31, 2023, cash and cash equivalents were $53.7 million, short-term investments $269.7 million, long-term investments $6.0 million, and restricted cash $2.7 million. Cash, cash equivalents, restricted cash, and investments totaled $332.1 million. Total assets were $458.2 million and stockholders’ equity was $346.6 million. The company reported no financial borrowings; operating lease liabilities totaled $91.3 million, including $5.8 million current. Accumulated deficit was $348.7 million.
Cash and cash equivalents plus restricted cash increased by $16.2 million during the quarter. Investing activities provided $36.9 million, primarily reflecting investment maturities net of purchases; capital spending was $4.8 million, mainly for manufacturing-facility construction. Financing cash flow was immaterial.
Material changes and business developments
- Net loss increased $4.8 million year over year as operating expenses rose $8.2 million, partly offset by a $3.4 million increase in net other income, principally interest income.
- Research and development expense increased $6.6 million; NKX101 and NKX019 direct external development costs were $4.9 million and $4.8 million, respectively. CRISPR cost-sharing reduced R&D expense by $0.9 million.
- Property and equipment, net, increased to $69.8 million from $61.9 million, largely reflecting construction in progress for facilities.
- On March 8, 2023, Nkarta amended its CRISPR collaboration to permit advancement of licensed candidates directed at a specified tumor antigen and to add related development and regulatory milestones and sales-based royalties.
- The CFO and Chief Business Officer notified the company of his resignation, effective June 30, 2023.
Outlook, risks, and contingencies
- Management expects substantial continuing losses and increasing R&D expense as clinical programs and manufacturing capabilities advance. It believes available cash, cash equivalents, restricted cash, and investments will fund operations for at least 12 months from the filing date; this estimate depends on assumptions and may change.
- A shelf registration statement for offerings of up to $350 million became effective May 5, 2023, after quarter-end. The filing reports no ATM stock sales in Q1. Additional financing may be needed and could dilute shareholders, add restrictions, or require licensing or surrender of product rights.
- Clinical development remains early-stage and uncertain. Risks include trial safety or efficacy results, enrollment and retention, competition for patients, manufacturing reliability, and regulatory requirements. The filing notes fludarabine shortages have already delayed enrollment at some trial sites.
- Inflation and supply-chain constraints have increased or could increase facility construction, manufacturing, and clinical-supply costs and delay the commercial-scale facility. Miltenyi is the sole supplier for certain manufacturing equipment and reagents.
- Nkarta reported no material pending litigation expected by management to adversely affect the company. Reexaminations of three licensed patents concluded with claims maintained in amended form; the amended claims do not relate to current product candidates. The company cautions that further challenges could be costly and affect intellectual-property rights.
- No provision for income taxes was recorded; deferred tax assets remain fully offset by a valuation allowance. Disclosure controls and procedures were assessed as effective at a reasonable-assurance level, with no material quarterly change in internal control over financial reporting.
Important facts for investors to verify
- Latest NKX101 and NKX019 clinical data, trial enrollment and timing, and any safety developments.
- Whether fludarabine availability, other supply constraints, or manufacturing-facility construction affect trials, costs, or timelines.
- Cash use against management’s stated minimum 12-month runway, future financing plans, and potential dilution under the shelf registration or ATM program.
- Facility lease commitments and construction spending, alongside the company’s progress toward commercial-scale manufacturing.
- Leadership transition effective June 30, 2023, and any subsequent changes to management or operating plans.