Kura Oncology, Inc. 2019 Form 10-K Summary
Business context and reporting period
Kura Oncology is a clinical-stage biopharmaceutical company developing precision oncology medicines and companion diagnostics. The filing covers the fiscal year ended December 31, 2019; fourth-quarter figures are also disclosed. Kura had no approved products and generated no product-sales revenue.
The lead program was tipifarnib, an oral farnesyl transferase inhibitor, with principal development efforts in HRAS-mutant head and neck squamous cell carcinoma (HNSCC) and biomarker-selected hematologic and solid tumors. Other candidates were KO-947, an ERK inhibitor, and KO-539, a menin-MLL inhibitor.
Financial performance and liquidity
| Metric | 2019 | 2018 | Change |
|---|---|---|---|
| Revenue from product sales | None | None | Not applicable |
| Operating expenses | $67.5 million | $62.9 million | +$4.6 million |
| Research and development expense | $47.8 million | $46.8 million | +$1.0 million |
| General and administrative expense | $19.7 million | $16.1 million | +$3.6 million |
| Other income, net | $4.3 million | $2.4 million | +$1.9 million |
| Net loss | $63.1 million | $60.4 million | +$2.7 million loss |
| Basic and diluted loss per share | $1.51 | $1.72 | Loss per share improved |
| Net cash used in operating activities | $54.8 million | $48.7 million | +$6.1 million use |
| Cash, cash equivalents and short-term investments | $236.9 million | $179.0 million | +$57.9 million |
Fourth-quarter 2019 operating expenses were $19.0 million, net loss was $17.9 million and loss per share was $0.39. The filing does not provide operating or net profit margins because the company had no product revenue; it remained loss-making.
At December 31, 2019, total assets were $242.0 million, working capital was $224.0 million, total liabilities were $23.2 million and stockholders’ equity was $218.8 million. Accumulated deficit was $212.9 million.
Net cash provided by financing activities was $111.1 million, primarily reflecting the June 2019 public offering. Kura sold 6.785 million shares at $17.00 per share and received approximately $108.1 million in net proceeds. The $75.0 million 2019 at-the-market facility had not been used as of year-end.
Debt consisted primarily of a $7.5 million Silicon Valley Bank term loan, bearing interest at 5.50% at year-end and maturing May 1, 2023. Principal repayment is scheduled to begin in December 2020. Kura could borrow up to an additional $12.5 million under the facility through May 1, 2020, subject to its terms.
Material changes versus the prior comparable period
- Operating expenses increased 7%, driven by higher personnel and general and administrative costs, partially offset by lower tipifarnib- and KO-539-related costs and lower share-based compensation within research and development.
- Research and development spending shifted toward the tipifarnib registration-directed program and the KO-539 Phase 1/2 trial. Tipifarnib-related costs declined to $26.8 million from $27.8 million, while personnel and other research costs increased to $11.7 million from $7.3 million.
- General and administrative expense rose to $19.7 million from $16.1 million, primarily due to higher personnel costs and non-cash share-based compensation.
- Interest income increased to $4.7 million from $3.2 million, contributing to higher other income.
- Cash resources increased materially following the June equity offering, although operating cash burn also increased.
- Kura adopted the new lease accounting standard on January 1, 2019, recognizing approximately $0.6 million of operating lease right-of-use assets and liabilities; the adoption did not materially affect results or cash flows.
Clinical progress, outlook and unusual items
- In the RUN-HN Phase 2 trial, 10 of 18 efficacy-evaluable patients achieved confirmed partial responses, for a 56% objective response rate. Median progression-free survival was 6.1 months versus 2.8 months on the last prior therapy. These results were investigator-assessed and may not predict independent review in the registration-directed trial.
- The AIM-HN registration-directed trial in HRAS-mutant HNSCC was designed to enroll at least 59 evaluable patients after prior platinum therapy. Management expected full enrollment in the first quarter of 2021 and indicated that a positive trial could potentially support an accelerated-approval application.
- The FDA granted Fast Track Designation to tipifarnib for HRAS-mutant HNSCC after progression on platinum therapy. Fast Track status does not assure approval or a shorter development timeline.
- In relapsed or refractory angioimmunoblastic T-cell lymphoma, 20 evaluable patients produced five complete responses and five partial responses, for a 50% objective response rate; the intent-to-treat response rate was 38%. Management planned a 128-patient registration-directed trial in advanced T-cell lymphomas with a follicular helper T-cell phenotype, expected to begin in the second half of 2020.
- Kura planned additional 2020 work in CMML, pancreatic cancer and other CXCL12-driven indications. These plans remained subject to clinical, regulatory and funding risks.
- KO-947 development was affected by a dose-limiting serious adverse event. Enrollment was voluntarily paused and the FDA placed the Phase 1 trial on partial clinical hold. Kura was seeking to lift the hold and initiate an expansion cohort.
- KO-539 entered a Phase 1/2 trial in relapsed or refractory AML in September 2019. The FDA granted orphan drug designation for KO-539 in AML in July 2019.
- Management believed existing cash, cash equivalents and short-term investments would fund operating and capital requirements into 2022, but stated that substantial additional financing would be required over time.
Key risks and contingencies
- Kura is dependent on clinical and regulatory success, particularly for tipifarnib, and has no approved products or product revenue.
- AIM-HN could fail to confirm earlier investigator-assessed results, enrollment could be delayed by the small biomarker-defined patient population, and the required companion diagnostic may not be approved or adopted.
- KO-947 remained subject to a partial clinical hold and additional safety monitoring.
- The company expects continuing operating losses and negative operating cash flow and may need additional equity, debt, collaboration or licensing financing, potentially causing dilution or restricting operations.
- Clinical programs depend on third-party contract research organizations, clinical sites, manufacturers and diagnostic partners. Supply, enrollment, data quality or compliance failures could delay development.
- Tipifarnib’s composition-of-matter patents had expired in the United States and Europe in 2016; protection relies substantially on method-of-use patents, regulatory exclusivity and potential companion-diagnostic strategies.
- License agreements require potential development, regulatory and sales milestones of up to approximately $80.0 million in aggregate, plus tiered royalties ranging from low single digits to low teens on future net sales.
- The SVB loan is secured by substantially all assets other than intellectual property and contains restrictive covenants and events of default that could accelerate repayment.
- There were no material legal proceedings reported. The company stated that its disclosure controls and internal control over financial reporting were effective, and Ernst & Young issued unqualified audit opinions.
Important facts for investors to verify
- Whether AIM-HN enrollment and timing remained on track and whether independent radiology review confirms the reported response rate.
- The FDA’s resolution of the KO-947 partial clinical hold and any resulting changes to the program.
- Cash burn, remaining liquidity and the timing or terms of any future financing.
- Progress and regulatory requirements for the HRAS companion diagnostic.
- Clinical results from the planned T-cell lymphoma, CMML and pancreatic cancer programs.
- Potential dilution from the unused $75.0 million ATM facility, 4.08 million outstanding options and other equity-linked securities.
- Debt covenant compliance, scheduled principal payments and the availability or expiration of the additional $12.5 million borrowing capacity.
- Milestone, royalty and licensing obligations if any candidate advances toward approval or commercialization.