Kura Oncology, Inc. — Form 10-Q Summary
Business context and reporting period
Kura Oncology is a clinical-stage biopharmaceutical company developing precision cancer medicines and biomarker-based treatment strategies. The filing covers the three and six months ended June 30, 2017, and was filed August 7, 2017. The company had 21.4 million common shares outstanding as of August 2, 2017.
- Tipifarnib: being evaluated in four Phase 2 programs for HRAS-mutant solid tumors, peripheral T-cell lymphoma, myelodysplastic syndromes and chronic myelomonocytic leukemia.
- KO-947: an ERK inhibitor that entered a Phase 1 clinical trial in April 2017; initial data was expected in 2018.
- KO-539: a menin-MLL inhibitor in preclinical development.
Financial condition and operating results
| Metric | Three months ended June 30, 2017 | Three months ended June 30, 2016 | Six months ended June 30, 2017 | Six months ended June 30, 2016 |
|---|---|---|---|---|
| Product revenue | $0 | $0 | $0 | $0 |
| Total operating expenses | $7.9 million | $6.8 million | $15.6 million | $13.8 million |
| Research and development | $5.7 million | $4.9 million | $11.2 million | $9.6 million |
| General and administrative | $2.3 million | $1.9 million | $4.4 million | $4.2 million |
| Net loss | $7.8 million | $6.7 million | $15.4 million | $13.3 million |
| Basic and diluted loss per share | $0.40 | $0.36 | $0.78 | $0.72 |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $14.7 million | $13.1 million |
Because Kura has no approved products and no product sales, revenue and traditional gross-margin measures are not meaningful. Operating performance is driven primarily by research and development spending, clinical-trial activity and corporate expenses.
- Cash and cash equivalents were $12.2 million at June 30, 2017, compared with $9.7 million at December 31, 2016.
- Short-term investments were $41.1 million, compared with $58.1 million at year-end 2016. Cash, cash equivalents and short-term investments totaled approximately $53.2 million.
- Total assets were $55.8 million and stockholders’ equity was $43.6 million at June 30, 2017.
- Long-term debt, net of discount, totaled $7.4 million, including $0.5 million classified as current. The term loan carried an 8.25% interest rate at June 30, 2017.
- Share-based compensation expense increased to $1.9 million for the first six months of 2017 from $0.9 million in the prior-year period.
Material changes versus the prior comparable period
- Six-month net loss increased by $2.1 million, or approximately 15%, primarily reflecting higher research and development spending and increased interest expense.
- Six-month research and development expense increased $1.6 million, or approximately 16%. Tipifarnib clinical development expense increased $1.8 million, while discovery and preclinical program spending decreased $1.3 million following nomination of KO-539 as a development candidate.
- Six-month general and administrative expense increased $0.2 million, largely due to higher share-based compensation.
- Net cash used in operating activities increased $1.6 million to $14.7 million.
- Investing activities provided $17.0 million, principally from maturities of marketable securities, compared with $2.4 million in the prior-year period.
- The company borrowed $7.5 million under its term loan facility in 2016; no additional debt was drawn in the first six months of 2017.
Clinical developments, outlook and risks
- Preliminary data reported after quarter-end from five evaluable patients with HRAS-mutant head and neck squamous cell carcinoma showed three partial responses and two cases of stable disease. Enrollment in the cohort was ongoing.
- Preliminary PTCL data showed clinical benefit in seven of 18 patients, including three partial responses and four cases of stable disease. The company expanded enrollment to evaluate CXCL12 as a potential biomarker.
- The MDS Phase 2 study was being modified to prospectively evaluate baseline neutropenia as a potential response-enrichment marker and to change the primary endpoint from transfusion independence to objective response.
- Management expected existing cash, cash equivalents and short-term investments to fund current operations into the second half of 2018, but stated that substantial additional financing would be required to continue development activities.
- The company had an amended term loan facility of up to $20.0 million, with up to $12.5 million of additional Term B borrowing available during the August 1 to October 31, 2017 draw period, subject to conditions. The facility includes an unused fee, interest obligations, covenants and security interests in substantially all assets other than intellectual property.
- An at-the-market facility allowed sales of up to $25.0 million of common stock. As of August 2, 2017, 14,300 shares had been sold for gross proceeds of $163,000.
- Key risks include continued operating losses, dependence on additional capital, clinical-trial enrollment and results, regulatory approval, safety and efficacy outcomes, companion-diagnostic development, third-party manufacturing and clinical-service providers, intellectual-property protection and potential stockholder dilution.
- The company reported no material legal proceedings and stated that it was in compliance with material debt covenants. Management concluded that disclosure controls and procedures were effective as of June 30, 2017.
Most important facts for an investor to verify
- Whether the reported tipifarnib responses are confirmed and durable in larger, biomarker-selected patient populations.
- Progress, enrollment, safety findings and data timing for the KO-947 Phase 1 trial and the modified MDS and PTCL studies.
- Actual cash burn and whether the stated runway into the second half of 2018 remains valid after subsequent clinical and operating expenditures.
- Whether Kura draws the available Term B loan, incurs related fees and warrants, or raises capital through the ATM facility or other financings.
- The regulatory and commercial significance of tipifarnib’s limited patent protection, including the July 2017 HRAS-mutant head and neck cancer patent.
- Potential dilution from future equity offerings, outstanding options, restricted awards and warrants.