Business context and reporting period
Nkarta, Inc. filed this unaudited Form 10-Q for the quarter and nine months ended September 30, 2021. The company is a development-stage biopharmaceutical business developing engineered, off-the-shelf natural killer (NK) cell cancer therapies. It has no approved products and has not generated revenue from product sales.
NKX101 was in a Phase 1 trial for relapsed/refractory AML and higher-risk MDS. NKX019’s Phase 1 trial for B-cell malignancies began dosing after quarter-end: the company announced in October 2021 that the first patients had been dosed. In May 2021, Nkarta entered a research collaboration with CRISPR Therapeutics covering gene-edited NK and NK+T cell programs and licenses for up to five gene-editing targets.
Financial performance and liquidity
Amounts below are in millions of dollars, except per-share data. As a clinical-stage company without product sales, Nkarta reported no revenue; gross margin and product margins are not applicable.
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Research and development expense | $16.6 | $9.8 | $46.1 | $25.0 |
| General and administrative expense | $5.8 | $3.9 | $17.4 | $8.6 |
| Total operating expenses | $22.4 | $13.7 | $63.5 | $33.5 |
| Net loss | $22.4 | $13.7 | $63.3 | $73.5 |
| Net loss per share, basic and diluted | $0.68 | $0.44 | $1.93 | $6.39 |
At September 30, 2021, cash and cash equivalents were $96.2 million, short-term investments were $161.5 million and restricted cash was $2.1 million, totaling $259.8 million. Current assets were $264.6 million and current liabilities $12.1 million. The company reported $12.8 million of operating lease liabilities ($2.5 million current); the filing does not report outstanding borrowings or other financial debt.
Operating cash use was $50.4 million for the nine months, compared with $30.7 million in 2020. Investing activities provided $50.4 million, mainly from investment maturities, while financing activities provided $1.2 million, mainly from stock-option exercises. Cash, cash equivalents and restricted cash increased by $1.2 million during the period. The company reported no sales under its $150 million at-the-market program through September 30.
Material changes versus the prior comparable period
- Q3 operating expenses rose $8.7 million year over year, led by higher R&D costs for NKX101 and NKX019, increased personnel and share-based compensation. Nine-month operating expenses increased $30.0 million.
- Q3 net loss increased to $22.4 million from $13.7 million. For the first nine months, net loss was lower than in 2020, primarily because the prior-year period included a $40.2 million noncash expense from remeasuring a preferred-stock purchase-right liability. Operating loss nevertheless increased year over year.
- Cash, cash equivalents and restricted cash were broadly stable compared with December 31, 2020, while short-term investments declined from $218.2 million to $161.5 million. Investment purchases, maturities and reclassifications affect these balances.
- Lease liabilities increased, and the company entered a new facility lease in July 2021. Its stated expected base rent over that lease term is approximately $98.8 million; rent begins on the lease commencement date.
Outlook, commentary and risks
Management expects substantial losses and higher operating expenses as clinical development, research, manufacturing and public-company costs grow. It believes existing cash, cash equivalents, restricted cash and short-term investments will fund obligations for at least 12 months from the filing date, but says substantial additional funding will be needed for longer-term plans. Funding could involve equity, debt or partnerships and may dilute shareholders or require the company to grant rights to programs.
Key uncertainties include early-stage clinical outcomes and enrollment, potential adverse events, the novel and complex manufacturing process, reliance on third-party suppliers (including a sole supplier for certain manufacturing steps), facility buildout and qualification, and COVID-19-related site, vendor, construction and supply-chain disruptions. The filing also reports third-party requests for ex parte reexamination of two licensed U.S. patents related to NKX101; patent rights could be narrowed or lost, and proceedings may be costly. The company reported no pending legal claims it considered likely to have a material adverse effect. Management said disclosure controls and procedures were effective as of September 30, 2021.
The filing provides no product revenue or profitability guidance and no specific clinical milestone timetable beyond the program updates described above.
Most important facts for investors to verify
- Current cash burn, investment balances and the assumptions supporting management’s stated 12-month funding runway; also monitor any ATM or other financing activity after quarter-end.
- NKX101 and NKX019 trial enrollment, safety, efficacy and timing, including whether COVID-19 or manufacturing constraints cause further delays.
- Progress, costs and commencement timing for the new manufacturing and laboratory facilities, and the long-term lease obligations they create.
- Outcome and status of patent reexaminations affecting NKX101-related patents.
- CRISPR collaboration development plans, cost sharing and any subsequent co-development or co-commercialization terms.