Kura Oncology, Inc. — Q3 2021 Form 10-Q Summary
Business context and reporting period
Kura Oncology is a clinical-stage biopharmaceutical company developing precision cancer medicines and related molecular or cellular diagnostics. The filing covers the three and nine months ended September 30, 2021, and was filed November 4, 2021. Kura had no approved products and generated no product revenue.
- Clinical-stage programs: tipifarnib, KO-539, and preclinical candidate KO-2806.
- Tipifarnib was being evaluated in HRAS-mutant head and neck squamous cell carcinoma and other hematologic and solid-tumor indications.
- KO-539 was being evaluated in relapsed or refractory acute myeloid leukemia in the KOMET-001 Phase 1/2 trial.
Financial results and key metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development expense | $22.4 million | $16.6 million | $63.8 million | $42.9 million |
| General and administrative expense | $11.3 million | $7.6 million | $34.5 million | $22.7 million |
| Total operating expenses | $33.7 million | $24.2 million | $98.2 million | $65.6 million |
| Net loss | $33.4 million | $23.8 million | $97.7 million | $63.5 million |
| Net loss per share | $0.50 | $0.42 | $1.47 | $1.24 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $81.2 million | $51.5 million |
The filing does not present meaningful revenue or operating margins because Kura has no product sales. Share-based compensation expense was $6.1 million in Q3 and $17.2 million for the first nine months, compared with $3.4 million and $9.1 million, respectively, in the prior-year periods.
- Cash and cash equivalents at September 30, 2021: $39.2 million.
- Short-term investments: $504.3 million.
- Cash, cash equivalents and short-term investments: $543.4 million.
- Total assets: $561.1 million; total liabilities: $27.4 million.
- Accumulated deficit: $400.2 million.
- Long-term debt: none at September 30, 2021, following repayment of the Silicon Valley Bank term loan.
- Operating lease liabilities: approximately $7.4 million, including $5.1 million classified as long term.
Material changes versus the prior comparable period
- Q3 research and development expense increased $5.8 million, primarily from higher KO-539 clinical-trial and manufacturing-development costs, discovery activities, and share-based compensation.
- Nine-month research and development expense increased $20.9 million. Tipifarnib costs rose due to companion-diagnostic development, patient screening and clinical costs; KO-539 costs rose due to clinical development and manufacturing activities.
- Q3 general and administrative expense increased $3.7 million, primarily from higher non-cash share-based compensation, professional fees and headcount-related personnel costs.
- Nine-month net loss increased $34.3 million, and net cash used in operating activities increased $29.7 million.
- Investing cash use increased to $200.9 million, principally because the company purchased more marketable securities.
- Kura repaid all amounts owed under its prior term loan in May 2021, paying approximately $6.6 million, and recorded a $0.2 million loss on extinguishment of debt.
- Shares outstanding increased to 66.5 million at September 30, 2021 from 66.2 million at December 31, 2020.
Guidance, outlook, management commentary and risks
- Management stated that existing cash, cash equivalents and short-term investments were expected to fund operating expenses and capital requirements into 2024 based on current plans.
- Kura expects research and development and general and administrative expenses to increase as clinical development expands.
- The company expected to complete enrollment of 12 evaluable patients in each of the 200 mg and 600 mg KO-539 Phase 1b expansion cohorts and determine a recommended Phase 2 dose by the first quarter of 2022.
- Kura expected to initiate the Phase 1/2 KURRENT trial of tipifarnib plus Novartis’s alpelisib in the fourth quarter of 2021.
- Kura expected to submit an investigational new drug application for KO-2806 by the end of 2022.
- The AIM-HN tipifarnib trial faced enrollment and timeline delays related to COVID-19 and protocol changes; the company could not reasonably forecast when enrollment would be complete.
- The company had an at-the-market facility allowing sales of up to $75.0 million of common stock, but had not sold shares under the facility as of the filing.
- Kura expects to need substantial additional funding and has no committed external source of funds. Additional financing could dilute shareholders, increase fixed obligations or require the company to relinquish product rights.
- Principal risks include clinical-trial failure or delay, COVID-19 disruptions, patient-enrollment challenges for biomarker-defined populations, adverse safety findings, regulatory non-approval, reliance on contract research and manufacturing organizations, companion-diagnostic development, intellectual-property limitations, competition and inability to obtain future financing.
- Potential contingent obligations included up to approximately $80.1 million of milestone payments under in-license agreements, plus sales royalties, if specified regulatory and commercial milestones are achieved.
- Management reported effective disclosure controls and procedures as of September 30, 2021 and no material changes in internal control over financial reporting.
- The filing states that Kura was not party to any legal proceeding expected by management to have a material adverse effect on its financial position or results of operations.
Most important facts for investors to verify
- Whether the projected cash runway into 2024 remains achievable given the rising clinical-development spending and continuing operating losses.
- Progress, enrollment and efficacy and safety data for the AIM-HN and KOMET-001 trials.
- Whether the KURRENT trial began as planned and whether the Novartis collaboration remains in place.
- Regulatory progress for tipifarnib, KO-539, their companion diagnostics and KO-2806.
- The timing, terms and potential dilution of future financing, including use of the $75.0 million ATM facility.
- The effect of COVID-19, patient-screening requirements, third-party supply arrangements and clinical-site capacity on development timelines.
- Future license milestones, royalty obligations and the scope and enforceability of intellectual-property protection.